Key Developments
Bitcoin BTC$71,102.49 and global equity markets have stabilized after an early-week sell-off and oil price spike that was triggered by the outbreak of military conflict between the U.S., Israel, and Iran. Bond markets, however, are signaling caution, as rising yields signal renewed inflation concerns and dwindling bets on Fed rate cuts.
BTC, the leading cryptocurrency by market value, traded above $70,000 Friday, up nearly 10% for the week. Prices briefly climbed to nearly $74,000 Wednesday after dropping to around $65,000 over the weekend as geopolitical tensions rattled markets.
The rebound has been mirrored in equity futures. Contracts tied to the S&P 500 slid to a multi-week low of 6,718 points Tuesday before recovering to around 6,840 as of writing.
The initial risk-off move came as oil prices surged following reports that Iran had blocked oil tankers transiting through the Strait of Hormuz, a critical chokepoint for global crude supplies. Markets stabilized after the U.S. moved quickly to calm fears, promising naval escorts and political risk insurance for oil and gas tankers traveling through the strait.
Still, the bond market remains uneasy.
The yield on the 10-year U.S. Treasury note has risen for four consecutive days, climbing from 3.93% to 4.15%. Bond prices move inversely to yields. Meanwhile, the two-year yield, which is more sensitive to interest rate expectations, has jumped from 3.37% to nearly 3.60%.
The move higher in yields suggests traders are reassessing the outlook for monetary policy as the conflict-driven spike in energy prices threatens to rekindle inflation pressures.
Market Context
According to CME Fed funds futures, investors now see less than a 50-50 chance of two 25-basis-point Fed rate cuts this year, down from nearly 80% before the onset of the conflict.
“The rates market is revealing the tension in this rally,” Bryan Tan, trader at leading digital asset market maker Wintermute, said in an email, noting the rise in yields.
What To Watch
“The conflict between a resilient economy (ISM Services at 56.1, ADP at +63K vs +50K expected) and an inflationary energy shock is historically the kind of setup that keeps the Fed frozen for longer. The Warsh nomination officially hitting the Senate this week adds another layer of hawkish uncertainty,” Tan added.
Some observers note that the inflationary impact of oil shocks typically unfolds gradually across the global economy, suggesting yields could remain elevated in the weeks ahead and potentially cap upside in risk assets such as stocks and cryptocurrencies.
“After major geopolitical shocks, oil prices usually rise gradually for weeks. The average pattern shows oil typically climbing 20–30% within ~60 days after the shock,” analyst Jack Prandelli explained on X. “Markets often underprice the first phase of supply risk. The real move tends to happen once physical disruptions start showing up in flows and inventories.”
Recent strong economic data in the U.S. has also contributed to the rise in yields and the scaling back of rate-cut expectations. Data released Tuesday showed economic activity in the U.S. services sector continued to expand in February, with the ISM index rising to 56.1. The ADP private payrolls report showed 63,000 job creations in February, the strongest reading since July 2025.
Attention now turns to Friday’s nonfarm payrolls report and wage growth figures. A hotter-than-expected print could further weaken expectations for Fed rate cuts and inject fresh volatility into financial markets.
