War Clouds! World's Most Dangerous Strait Choked Off, Oil Prices Soar 9%, Will Fed Rate Cuts Fail? Can Your $BTC Hold Up?

The U.S. inflation data released in early March remains stagnant. The Consumer Price Index year-over-year stays at 2.4%, and core metrics show no signs of accelerating decline. This report, collected at the end of February, just missed the trigger that ignited the Middle East tinderbox later on. Market analysts suggest that, excluding minor methodological biases, actual inflation could be closer to 2.8%, still far from the Federal Reserve’s 2% target. Morgan Stanley believes the Fed might cut rates as early as June, but a conflict could derail that plan.

The conflict centers on the Strait of Hormuz. The Iranian Revolutionary Guard has issued a clear warning: they will not allow “a single barrel of oil” to pass. This vital global energy chokepoint is now nearly closed. Satellite images show tankers stranded on both sides of the strait, and any ships attempting passage could be attacked. About 20 million barrels of crude oil and large quantities of liquefied natural gas pass through daily, with one-fifth heading to Asia. If this bottleneck is blocked, the global supply will immediately face a structural gap.

History is the best teacher. The Gulf War in 1990, Middle Eastern unrest in 2011, and the Russia-Ukraine conflict in 2022 each caused energy price shocks that forced the Fed to extend tightening or delay easing. Today, Brent crude has rebounded above $100, with a single-day gain of nearly 9%. Analysts warn that in the short term, oil prices could test the $120 to $150 range. If the strait remains closed for weeks, we could revisit the energy crises of the 1970s. Such cost-push inflation is one of the most challenging dilemmas for central bankers.

Markets are voting with real money. Data from prediction markets show traders betting a 64% chance of a rate cut by the Fed in June, rising to 81% by September. The path remains uncertain: evolving conflicts, inflation trends, employment data—any of these could change the script. If energy prices stay high, the Fed may be forced to prolong high interest rates; conversely, easing geopolitical risks and falling core inflation could allow one or two rate cuts this year.

For the crypto market, the sustained high-rate environment continues to suppress risk appetite and asset valuations. However, once clear signals of rate cuts emerge, suppressed market liquidity will rebound, fueling upside for assets like $BTC. Some observations note that since October last year, on-chain data shows short-term holders are generally at a loss, a typical feature of market correction phases. Prices are confined between $54,400 and $78,400, with a negative skew in return distribution until breaching $70,000.

An interesting phenomenon is that, despite looming macro clouds, crypto assets have recently shown relative resilience. While stocks, bonds, and even gold decline, cryptocurrencies have held their ground. One explanation is that the marginal sellers have dried up. The entire crypto market’s leverage is around $60 billion, only half of its peak. In comparison, speculative positions in gold have accumulated significantly. When all assets fall, the forced selling pressure in crypto is comparatively lighter. Looking at a 12- to 18-month cycle, current prices are attractive, even though buyers might push the lower bound down to around $50,000.

Next week’s Federal Open Market Committee (FOMC) meeting will be a key catalyst. Meanwhile, traditional markets are also volatile: gold hovers around $5,153 per ounce, the dollar index remains near 99.4, and the 10-year U.S. Treasury yield stays above 4.2%. All point to the same core narrative: global capital is navigating a macro turbulence triggered by geopolitical tensions. Meanwhile, crypto assets are testing their true resilience amid this storm.

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