Ukraine has complicated President Donald Trump’s efforts to stabilize oil markets amid the Iran war, heightening risks to financial markets, including cryptocurrencies.
For almost a month, markets have been gripped by a single concern: the Iran war. Disturbances in the Strait of Hormuz – a critical oil choke point – have driven prices sharply higher, stoking fears of sticky inflation, a risk-off shift and renewed Fed rate hikes.
To cool things down, the Trump administration quickly lifted sanctions on Russian crude in the short term and opened the tap to compensate for oil supply disruptions caused by the Iran war.
It seemed like a solid plan to stabilize energy markets until Ukraine blew it up.
This week, Ukraine launched drone strikes on ports and refineries in Russia’s Leningrad, prompting what one observer described as “the most serious threat” to the country’s oil exports since Putin’s full-scale invasion of Ukraine in 2022.
The damage is significant, with around 40% of Russia’s oil export capacity offline. Oilprice.com editor Michael Kern described it as “a logistics problem first — and a supply problem second,” stressing that moving oil to buyers is now as difficult as producing it.
“Along with the war in the Middle East and the de facto closure of the Strait of Hormuz and subsequent outages in oil/LNG production, the Russian disruption adds a new element to already skyrocketing oil prices,” Kern noted.
In other words, oil prices may remain high longer than first expected. For risk assets, including bitcoin and other cryptocurrencies, that’s a problem because higher sticky energy prices can lead to sticky inflation, potentially putting pressure on global central banks to raise borrowing costs and drain liquidity.
Traders are already bracing for a potential Fed rate hike in the near term. According to Bloomberg, flows in the options market linked to overnight interest rates indicate that traders are betting on a rate hike within two weeks.
Taken together, these factors suggest that bitcoin’s recent resilience may face tests, with the $65,000-$75,000 range vulnerable to a downside break.
At press time, bitcoin was trading near $68,500, down nearly 2% over the past 24 hours, according to CoinDesk data. WTI oil, which fell nearly 10% on Monday to $83.95 a barrel, has since returned to $93.50. Brent oil is once again trading above the $100 mark.
