Ukraine has complicated President Donald Trump’s efforts to stabilize oil markets amid the war in Iran, amplifying risks for financial markets including cryptocurrencies.
For almost a month, the markets have been grappling with a single concern: the war in Iran. Disruptions in the Strait of Hormuz – a critical oil bottleneck – have sent prices soaring, stoking fears of persistent inflation, risk aversion and further Fed rate hikes.
To calm the situation, the Trump administration quickly lifted sanctions on Russian crude in the short term, opening the tap to offset oil supply disruptions caused by the war in Iran.
This project appeared to be a solid plan to stabilize energy markets until Ukraine blew it up.
This week, Ukraine launched drone strikes on ports and refineries in Leningrad, Russia, leading to 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 extensive, with around 40% of Russia’s oil export capacity out of commission. Oilprice.com editor-in-chief Michael Kern described it as “a logistics problem first – and a supply problem second”, noting that getting oil to buyers is now as difficult as producing it.
“In conjunction with the war in the Middle East and the de facto closure of the Strait of Hormuz and subsequent oil and LNG production shutdowns, Russian disruptions add a new element to already exorbitant oil prices,” Kern noted.
In other words, oil prices could stay high for longer than initially expected. For risky assets, including bitcoin and other cryptocurrencies, this poses a problem, as higher energy prices could lead to persistent inflation, which could pressure global central banks to raise borrowing costs and drain liquidity.
Traders are already preparing for a possible 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 increase within two weeks.
Taken together, these factors suggest that bitcoin’s recent resilience could be tested, with the $65,000-$75,000 range vulnerable to a downside breakout.
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% to $83.95 a barrel on Monday, has since rebounded to $93.50. Brent crude is trading above the $100 mark again.
