American strikes against Iranian nuclear facilities have placed geopolitical risk at the heart of financial markets. In a few hours, oil soared, investors moved towards assets deemed the safest and cryptos, once again, revealed their sensitivity to international tensions. This resumption of hostilities raises a central question: faced with a major military crisis, can bitcoin compete with traditional safe haven assets, or does it remain a risk asset like the others?
In brief
- New American strikes against Iran are reigniting tensions in the Middle East and causing renewed risk aversion on financial markets.
- Oil, the dollar and bonds immediately benefit from the crisis, while investors fear a return of inflationary pressures.
- The major central banks are adopting divergent strategies in the face of this new environment, accentuating movements in the main world currencies.
- Despite an explosive geopolitical context, bitcoin and cryptos are limiting their losses, with the markets still banking on a de-escalation before the critical deadline in mid-August.
The military conflagration in Hormuz and the surge in oil and the dollar
Global markets were shaken this Wednesday July 8 by a series of critical events which immediately benefited traditional safe haven values:
- The resumption of military hostilities: the United States relaunched a series of targeted attacks against Iran on Tuesday, revoking the temporary license which until then authorized Tehran to export its oil to international markets;
- A major maritime incident: this direct military intervention follows the recent attack on three oil ships in the Strait of Hormuz, an essential transit route for the planet's energy supply;
- The explosion of the dollar index (DXY): in reaction to the escalation, the greenback jumped to a weekly high of 101.18, even reaching a peak at 101.210 during the session, its highest level since July 2;
- A warning from market experts: Westpac bank analysts highlighted the seriousness of the situation in their research note, saying that “Concerns about the stability of the peace deal re-emerged after Iran attacked ships passing through the Strait of Hormuz”.
This renewed tension caused immediate pressure on raw materials, extending the rally started during the previous session. At the start of trading in Asia this Wednesday, the barrel of Brent crude oil rose 2.6% to settle at $76.12, reflecting fears of a prolonged disruption in logistics flows. This sudden increase rekindles the specter of an inflationary crisis on a global scale, pushing investors to abandon risky assets to take refuge behind the dollar and bond yields.
Westpac's report explicitly warns of this phenomenon, adding that “concerns over the inflation outlook were front and center, seeing bond yields climb across the globe.” Thus, the alignment of a strong dollar and high yields dries up available liquidity, creating a hostile environment for equity markets.
The great upheaval of world currencies
Beyond the surge in the greenback, the current crisis reveals opposing trajectories among the world's major central banks, which are fighting differently against the return of inflation. The dollar strengthened by 0.1%, climbing up to 0.2% against the Japanese yen to trade at 162.28 yen, after hitting a high of 162.46 yen, marking its fourth consecutive session of gains. Conversely, the Reserve Bank of New Zealand (RBNZ) took the markets by surprise by increasing its key rate by 25 basis points to 2.5%, a first increase in more than three years, while warning “that further monetary reduction will probably be necessary”.
This firmness contrasts with the cautious posture of the Bank of Japan, symbolized by the statements of Toichiro Asada, member of the board of directors, who affirmed that he 'must see signs of demand-pull inflation before supporting further rate hikes'. Meanwhile, the euro fell to $1.1405, the pound sterling weakened to $1.3351 (touching $1.3353) and the Australian dollar stabilized around $0.6926 (peaking at $0.6938).
The resilience of the crypto market and the outlook for the mid-August deadline
In this particularly uncertain macroeconomic context, the crypto market shows a very moderate correction, with bitcoin trading down 0.2% to $63,518.35 and Ethereum falling 0.5% to $1,774.45. This relative stability against the dollar can be explained by a careful geopolitical reading on the part of investors, who perceive these clashes as a strategic positioning rather than as the start of a generalized conflict.
Analysts at DBS bank detailed this market psychology in their note, explaining that “for now, the market is sticking to the scenario that Tehran and Washington are still engaged in a high-stakes game for leverage during the temporary truce, and that Tuesday's incident will not escalate again into all-out war.” Thus, the resilience of prices shows that the crypto ecosystem is now integrating these external shocks with increasing maturity, refusing movements of systemic panic.
The outlook will depend on the ability of state actors to maintain an open channel of communication before the critical deadline set at the end of summer. The DBS bank, however, warns that the current calm could be short-lived, estimating that “the incident served as a reminder that the real risk remains the expiration of the interim ceasefire agreement in mid-August and the red line regarding transit fees in the Strait of Hormuz”.
If the Strait blockage were to tighten in mid-August, inflation through energy costs would force central banks to maintain high interest rates, penalizing overall liquidity. For bitcoin, this pivotal period will constitute a test of truth: either it will suffer from the selling pressure linked to the continued strengthening of the dollar, or it will manage to establish itself as an alternative decorrelated reserve asset for investors seeking to escape the instability of fiat currencies exposed to the oil shock.
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