Shares of stablecoin issuer Circle (CRCL) are up more than 20% this week, outperforming the broader market following Israeli and US airstrikes on Iran over the weekend.
Japanese bank Mizuho attributed the rise in part to a sharp rise in oil prices as tensions in the Middle East exploded. Rising crude prices could reignite inflationary pressures, reducing expectations of a rate cut by the Federal Reserve.
This dynamic is important for Circle. The company earns most of its revenue from interest income on U.S. government debt that it holds as reserves to back its USDC stablecoin. Higher interest rates translate into a higher return on these reserves, directly supporting income. Conversely, rate cuts compress this income stream.
Since the U.S. and Israeli strikes on Iran this weekend, WTI crude has climbed about 7-8% due to elevated geopolitical risk and supply disruption concerns.
Crypto markets were rocked on Saturday by the outbreak of war in the Middle East, along with bitcoin. fell sharply at the start of the session amid broader risk aversion, but prices have since stabilized.
Analysts Dan Dolev and Alexander Jenkins estimated that reduced rate cut expectations add about 1% to their Circle 2026 and 2027 revenue forecasts.
More importantly, analysts pointed to a doubling of the “tail risk” of a no-rate-cut scenario in 2026, according to FedWatch data from the Chicago Mercantile Exchange (CME), a change that could further support Circle’s valuation multiple.
A roughly 5% rise in Bitcoin over the past 24 hours could also contribute to positive sentiment. The largest cryptocurrency is currently trading around $68,100.
The bank raised its Circle price target to $100 from $90, while maintaining a neutral rating on the stock. The stock was trading up 6% at $101.90 at press time.
While higher long-term rates are positive in the short term, long-term revenue growth could come under pressure as stablecoins become increasingly commoditized, the report adds.
Circle shares gained more than 45% last week in a violent short squeeze following fourth-quarter results. The move ended what had been a steep 80% decline from last year’s record highs.
Learn more: Circle’s profit surge nears 50% as short selling, not strong financials, fuels rally
