Ukraine has complicated President Donald Trump’s efforts to stabilize oil markets amid the Iran war, amplifying risks to financial markets, including cryptocurrencies.
For almost a month, markets have been gripped by a single concern: the Iran war. Disturbances in the Strait of Hormuz – a critical oil choke point – have driven up prices sharply, stoking fears of persistent inflation, risk aversion and further rate hikes from the Federal Reserve.
To calm things down, the Trump administration quickly lifted sanctions on Russian crude in the short term, turning on the tap to offset oil supply disruptions caused by the Iran war.
It seemed like a solid plan to stabilize energy markets until Ukraine blew it up.
This week, Ukraine launched drone attacks on ports and refineries in Leningrad, Russia, triggering 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 significant, as approximately 40% of Russia’s oil export capacity is out of commission. Oilprice.com editor Michael Kern described it as “first a logistics problem, then a supply problem,” stressing that getting oil to buyers is now as difficult as producing it.
“Along with the war in the Middle East and the de facto closure of the Strait of Hormuz and subsequent disruptions to oil and LNG production, the Russian disruption adds a new element to already sky-high oil prices,” Kern noted.
In other words, oil prices may remain elevated for longer than initially anticipated. For risk assets, including bitcoin and other cryptocurrencies, that’s a problem because 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.
Together, these factors suggest that bitcoin’s recent resistance may face tests, with the $65,000 to $75,000 range vulnerable to a break lower.
At press time, bitcoin was trading near $68,500, down nearly 2% in the last 24 hours, according to data from CoinDesk. WTI oil, which fell nearly 10% to $83.95 a barrel on Monday, has since recovered to $93.50. Brent crude oil is trading above the $100 mark again.
