President Trump convened a national security meeting to discuss potential military operations against Iran after Tehran rejected a US peace proposal focused on nuclear restrictions. The ceasefire that had held for roughly 11 weeks is, in Trump’s words, on “life support.”
He put the odds of the deal surviving at 1%. Markets are already pricing in what comes next.
What’s on the table
The national security discussion reportedly covered a range of military options. Among them: targeted airstrikes on Iranian infrastructure and the potential restart of what’s being called “Project Freedom,” a plan for US naval escorts through the Strait of Hormuz.
The Strait of Hormuz is the narrow waterway between Iran and the Arabian Peninsula through which roughly a fifth of the world’s oil supply passes daily. If that chokepoint gets disrupted, energy markets go haywire, and everything downstream, from shipping costs to gas prices to inflation expectations, follows.
Trump is expected to consult with Chinese President Xi Jinping before any operations are greenlit. No military action is expected before that conversation takes place.
How crypto is reacting
Bitcoin rose 2.5% to $98,500 as tensions intensified. Oil-linked tokens have also moved. USO gained 4% on fears that military action near the Strait of Hormuz could restrict crude oil flows.
Some analysts are forecasting a potential 5-10% rally in Bitcoin if military strikes are actually executed. The logic runs something like this: strikes would likely spike oil prices, which feeds inflation expectations, which weakens confidence in fiat purchasing power, which makes hard-capped assets like Bitcoin look relatively more attractive.
It’s worth noting that the same analysts acknowledge increased volatility across the broader crypto market as a likely side effect. Equity investors reassessing their risk exposure in the face of Gulf tensions tend to pull capital from anything perceived as speculative.
The bigger picture
The ceasefire between the US and Iran was established roughly 11 weeks ago amid broader US-Israel hostilities in the region.
China has significant economic ties with Tehran, particularly around oil imports, and has no interest in seeing the Strait of Hormuz become a conflict zone.
The 2.5% move to $98,500 puts Bitcoin tantalizingly close to the $100K psychological barrier. Traders watching this situation should pay close attention to two things: the outcome of the Trump-Xi call and any movement of US naval assets toward the Persian Gulf.
The Strait of Hormuz angle is particularly important for crypto markets because of its second-order effects. Higher oil prices mean higher energy costs, which means higher Bitcoin mining costs, which can compress miner margins and potentially force selling pressure from mining operations that need to cover expenses.
