Crypto, Oil Markets In Flux With Growing Conflict in the Middle East

Both asset classes could continue to swing wildly as the latest aggression in the region reverberates throughout the world.

(Photo by Kanchanara on Unsplash)

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Iran fired more than 300 missiles and drones at Israel on Saturday, and while nearly all of them were thwarted, markets including crypto and oil are already reeling as fears of a much wider war spread.

Casualties of War

The war in Gaza has taken its toll on a variety of businesses — both in the Middle East and abroad. Pizza Hut, Burger King, Coca-Cola, McDonald’s, and Starbucks have seen their bottom lines take hits because of boycotts and, in some cases, conflict-related vandalism. And with hostilities continuing to rise, those problems could get worse.

President Biden and other world leaders have called for a diplomatic response to Iran’s attack, which may or may not come to fruition with both Israel and Iran saying they are preparing for escalation. That uncertainty was quickly reflected in financial markets:

  • Before Iran’s attack, oil prices had climbed since February to six-month highs and may not be done. “Oil prices might spike at the opening as this is the first time Iran has struck Israel from its territory,” UBS analyst Giovanni Staunovo told Reuters. “How long any bounce will last will … depends on the Israeli response.”
  • Bitcoin, the most popular of all the cryptocurrencies, also has seen historic highs lately, reaching nearly $74,000 in mid-March. But after the missile attacks on Israel, bitcoin suffered its steepest selloff in more than a year and a half. Then it recovered, rising nearly 7% and trading at around $64,600 as of Sunday morning, before dropping again just a few hours later, showing just how volatile the crypto market is amid a possibly escalating conflict.

The Halving is Happening: And that’s not the half of it for bitcoin, whose “halving” is fast approaching. Expected to happen on Saturday, the once-every-four-years software update will cut the amount of bitcoin that miners can earn each day for validating transactions, possibly leading to revenue losses of around $10 billion a year for the industry as a whole, Bloomberg reported. 

Halvings usually meant monumental price gains for bitcoin, but the returns have diminished upon each successive halving. But with bitcoin more popular than ever, thanks in large part to the debut of bitcoin exchange-traded funds in the US, maybe halvings will return to form.