CoinTelegraph reports that escalating oil prices could lead to higher inflation and negatively affect Bitcoin amid ongoing Middle East tensions.
Bitcoin has outperformed U.S. equities and gold since the U.S. and Israel's attack on Iran on February 28, highlighting its resilience amid geopolitical shocks. However, a potential oil price surge to $180 per barrel could challenge this trend if Middle East supply disruptions continue.
Current Oil Market Dynamics
As of Friday, Brent crude oil trades at around $105 per barrel, marking a 50% increase since the conflict began. Oil transits through Iran's Strait of Hormuz have dropped to 9.71 million barrels per day in mid-March from 25.13 million in February, based on Kpler data.
Vortexa estimates a further decline to 7.5 million barrels per day, underscoring the severity of the supply shock. A 2023 U.S. Federal Reserve study indicates that every 10% rise in crude prices adds 0.35 to 0.40 percentage points to U.S. consumer price index (CPI).
If oil prices reach $180 per barrel, U.S. headline inflation could rise to 5%, exceeding the Federal Reserve's 2% target and delaying potential rate cuts until October 2027, according to market adjustments.
These macroeconomic pressures could drive Bitcoin prices down to around $51,000 in the coming months. Bitcoin's price has already fallen 9.50% from its recent high of nearly $76,000, forming a bear flag pattern as noted in market analysis.
MicroStrategy, led by Michael Saylor, halted its Bitcoin purchases this week after buying 22,337 BTC the previous week and 17,994 BTC the week before. This pause removes a significant demand source amid rising risks.
The Coinbase premium has turned negative, indicating softer U.S. demand for Bitcoin during the oil supply shock. Historically, such spikes in oil prices have been temporary, with markets normalizing as conflicts de-escalate.
