Shares of stablecoin issuer Circle (CRCL) have risen more than 20% this week, outperforming the broader market following the Israeli and US airstrikes against Iran over the weekend.
Japanese bank Mizuho attributed the rally in part to a sharp rise in oil prices as tensions flared in the Middle East. Higher crude oil prices could reignite inflationary pressures, reducing expectations of Federal Reserve rate cuts.
That dynamic is important for Circle. The company derives most of its revenue from interest income from US government debt that it holds as reserves backing its USDC stablecoin. Higher interest rates translate into a higher yield on those reserves, which directly supports income. On the contrary, rate cuts compress that income stream.
Since the US and Israeli attacks on Iran over the weekend, WTI crude oil has risen approximately 7% to 8% due to elevated geopolitical risk and concerns about supply disruption.
Crypto markets were shaken by the outbreak of war in the Middle East on Saturday, with bitcoin falling sharply in early trading amid a broader risk-off move, but prices have since stabilized.
Analysts Dan Dolev and Alexander Jenkins estimated that lower rate cut expectations add about 1% to their Circle revenue forecasts for 2026 and 2027.
More importantly, analysts flagged a doubling of the “right tail risk” of a no-rate-cut scenario in 2026, according to Chicago Mercantile Exchange (CME) FedWatch data, a change that could further support Circle’s valuation multiple.
A roughly 5% rise in bitcoin over the past 24 hours may also be contributing to the 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 6% higher at $101.90 at press time.
While higher rates for longer are positive in the short term, longer-term revenue growth could face pressure as stablecoins become increasingly commoditized, the report added.
Circle shares gained more than 45% last week in a violent short squeeze following fourth-quarter earnings. That move broke what had been a brutal 80% drop from the all-time highs reached last year.
Read more: Circle’s Post-Earnings Rise Nears 50% as Short Contraction, Not Strong Financials, Fuels Rally
