Oil Prices Surge to a Six-Week High: How Inflation Expectations and the Fed’s Rate Hikes Are Reshaping Crypto Asset Pricing?

On July 23, 2026, the international crude oil market saw a key breakthrough. WTI crude oil futures rose 3.1% to $89.52 per barrel, continuing to set a new high since June 11; the Brent crude oil futures settlement price was $94.07 per barrel, up $3.06, a gain of 3.36%. The domestic commodity futures market reacted in parallel: the main crude oil contract rose by more than 4%.

This price level is not an isolated market fluctuation. Measured from Brent’s near $71 low at the beginning of July, the rebound has been nearly 30%. In six weeks, oil prices have surged from the $70 range to above $90, and are transmitting pressure to the crypto market through a full chain of logic. The three core links in this chain—inflation expectations, the probability of rate hikes, and risk-asset valuation—form a key framework for understanding the macro environment of the current crypto market.

How Rising Oil Prices Reshape Inflation Expectations

Crude oil is one of the most basic inputs for the global economy. When Brent crude jumped from $71 to above $94, upward pressure on energy costs transmitted step by step along the industry chain. Transportation costs rise, chemical input prices increase, and electricity prices face pressure—these costs ultimately appear in the form of higher prices for end-consumer goods.

U.S. Bureau of Labor Statistics data provides a reference point: in June, U.S. prices fell by 0.4% month-on-month because energy prices dropped 5.7%. Oil prices moved in exactly the opposite direction, meaning the direction of inflation pressure has also reversed. The shipping crisis in the Strait of Hormuz means this rise is not a short-term pulse but a structural shock on the supply side.

Changes in inflation expectations directly affect the bond market. On July 23, the yield on 2-year U.S. Treasuries rose to 4.301%, the highest level in more than a year; the yield on 10-year Treasuries was approaching 4.66%. The rise in yields reflects the market’s repricing of future inflation—investors are demanding higher returns to compensate for inflation risk.

For the crypto market, an increase in inflation expectations by itself is not necessarily bearish. In the 2020 to 2021 cycle, higher inflation expectations boosted demand for Bitcoin as an “inflation hedge” asset. But the market environment in July 2026 is already different—while inflation is heating up, expectations for the Federal Reserve’s policy path are undergoing fundamental changes.

Why the Probability of Fed Rate Hikes Is Climbing Fast

The reversal in inflation expectations maps directly into the interest-rate market. Data from the CME FedWatch tool clearly documents this process: in early July, the market believed the probability of a rate hike at the July meeting was only 18%; by mid-July, that probability had risen to 46.5%.

As of July 23, CME FedWatch data shows a 65.3% probability that the Federal Reserve will keep rates unchanged in July, and a 34.7% probability of a 25 basis-point rate hike. Even more worth noting are expectations for September: the probability of keeping rates unchanged has fallen to 22%, while the probabilities for cumulative 25 basis points and 50 basis points of hikes are 54.9% and 23%, respectively. Traders believe the probability that the Federal Reserve will hike rates before year-end has already exceeded 90%.

Behind the rapid climb in the probability of rate hikes are multiple overlapping factors. The geopolitical conflict in the Strait of Hormuz directly pushes up energy prices; Federal Reserve Chair Warsh, in the minutes from the June meeting, directly attributed part of the recent inflation pressure to AI investment, pointing out that strong demand for data centers, power, and high-tech equipment has driven prices higher; the U.S. June CPI rose 3.5% year-on-year, and the PPI rose 5.5% year-on-year—both above levels that would give the Federal Reserve clear reason to ease monetary policy.

Market expectations are shifting from a “rate-cut cycle” narrative to a “higher rates for longer” narrative. This shift in expectations has far-reaching implications for the valuation logic of crypto assets.

Why Risk-Asset Valuation Is Under Pressure

Rate-hike expectations lift the dollar’s real interest rates, and real rates are the anchor for risk-asset pricing. Higher interest rates mean a higher discount rate applied to future cash flows, which compresses valuation multiples. This logic also applies to the Nasdaq, AI stocks, and crypto assets.

Bitcoin rose to $66,180 on July 23, but its rebound momentum clearly slowed. One notable comparison: semiconductor stocks have gained 69% cumulatively since 2026 to date, while Bitcoin has fallen 25% over the same period, showing a structural divergence in capital flows. This divergence reflects how the macro environment affects different asset classes differently—rate-hike expectations suppress non–yielding assets more directly.

The overall market capitalization of the crypto market is also under pressure. The global total crypto market cap on July 23 was about $2.26 trillion, while the historical peak in October 2025 had reached $4.27 trillion. The continued contraction in market cap aligns highly closely in timing with tightening global liquidity.

U.S. spot Bitcoin ETF fund flows provide another observation dimension. On July 22, ETFs recorded a net inflow of $203.2 million, marking positive growth for the sixth consecutive trading day. But the accumulated net outflow from May to June of about $6.9 billion remains large, and the current scale of inflows is still far from sufficient to offset the prior outflows. The slow recovery in the ETF market sets a higher hurdle for Bitcoin to break through the $60,000–$70,000 range.

Why Geopolitical Conflict Failed to Boost Bitcoin’s Safe-Haven Demand

This is the most important question worth examining in this round of trading. The usual asset-pricing logic for traditional geopolitical conflict is: war escalation → safe-haven demand → gold and Bitcoin rise. But the market performance in July 2026 provides the opposite evidence.

Gold did not benefit from the escalation of conflict. Spot gold slid toward the $4,000 level in Asian early trading on July 20, and gold prices in the second quarter fell 14%, the worst quarterly performance since 2013. Inflation-driven expectations for rate hikes weakened gold’s appeal as a non–yielding asset.

Bitcoin also failed to play the role of “digital gold.” Even though geopolitical risk surged, Bitcoin’s price did not receive a boost from safe-haven buying. The root reason is this: when inflation is rising mainly due to supply shocks, and the market expects central banks to respond with rate hikes, the safe-haven attributes of risk assets are offset by the liquidity-tightening effect caused by rate hikes. In this framework, the market categorizes Bitcoin as a risk asset rather than a safe-haven asset—its correlation with the Nasdaq and other growth assets is far higher than its correlation with gold.

The Complete Transmission Chain from Oil Prices to the Crypto Market

By linking the analysis above, we can form a complete transmission chain:

First link: Rising energy costs. Geopolitical conflict leads to disruptions in shipping in the Strait of Hormuz, affecting roughly one-fifth of global oil trade; crude oil prices jumped from $71 to above $94.

Second link: Inflation expectations heat up. Energy costs transmit along the industry chain, pushing up prices of end-consumer goods. In June, U.S. CPI rose 3.5% year-on-year, and inflation remains far above the Federal Reserve’s target level.

Third link: Rate-hike probabilities rise. Inflation data forces the market to reprice the Federal Reserve’s policy path. The probability of a rate hike in July rose from 18% at the start of the month to 34.7%, and the probability of a rate hike in September has already exceeded 75%.

Fourth link: Real rates move higher. Rate-hike expectations lift Treasury yields; the 2-year yield rose to 4.301%, an over-one-year high.

Fifth link: Risk-asset valuation comes under pressure. Higher real rates increase the discount rate, compressing valuation multiples of risk assets. Bitcoin’s rebound near $66,000 lacked strength, and the crypto total market cap shrank by more than 50% from its peak.

Structural Signals Behind Market Divergence

The impact of rising oil prices on different types of crypto assets is not homogeneous. As the largest and most liquid crypto asset by market cap, Bitcoin is the most sensitive to macro factors; while some token projects tied to real-economy development or the energy transition may face a more complex pricing environment.

The movement of the U.S. Dollar Index is also worth paying attention to. On July 23, the Dollar Index held near 101. A stronger dollar means crypto assets priced in dollars face additional exchange-rate pressure, and it also reflects a global trend of capital flowing back to dollar-denominated assets.

Senior analyst Nikita Zuborev at BestChange noted: “At the moment, a strengthening dollar and elevated bond yields are pulling liquidity out of risk assets such as cryptocurrencies.” This assessment accurately summarizes the macro environment currently facing the crypto market—the trend of tighter liquidity is still continuing, and sustained upward pressure in oil prices is reinforcing this trend.

Summary

On July 23, 2026, WTI crude touched $89.52 per barrel and Brent crude broke through $94.07 per barrel, with oil prices reaching the highest level in six weeks. This price movement creates three layers of pressure on the crypto market through the complete transmission chain of rising inflation expectations → increased probability of Fed rate hikes → pressure on risk-asset valuation. Bitcoin’s rebound momentum weakened near $66,000, and the crypto total market cap is down by more than half versus its historical peak; ETF inflow recovery remains limited. Geopolitical conflict did not trigger safe-haven demand for Bitcoin—instead, by pushing up energy prices and inflation expectations for rate hikes, it intensified market pressure. Until the oil price trend and the Federal Reserve’s July 29 rate decision are finalized, macro uncertainty will continue to suppress risk appetite in the crypto market.

FAQ

Q: What were the WTI and Brent crude oil prices on July 23, 2026, respectively?

WTI crude oil futures were at $89.52 per barrel, up 3.1%, continuing to set a new high since June 11; the Brent crude oil futures settlement price was $94.07 per barrel, up 3.36%.

Q: How does rising oil prices affect the crypto market?

Rising oil prices transmit to the crypto market through three channels: higher energy costs raise inflation expectations → inflation data prompts the market to reprice the Fed’s rate-hike path → higher rate-hike expectations lift real interest rates, suppressing risk-asset valuation. Bitcoin, as a risk asset, faces pressure within this framework.

Q: What is the Fed’s July rate-hike probability expected by the market currently?

As of July 23, 2026, CME FedWatch data shows a 34.7% probability of a 25 basis-point Fed rate hike in July, and a 65.3% probability of keeping rates unchanged. The probability of cumulative 25 basis points of hikes in September is 54.9%.

Q: What was Bitcoin’s price on July 23, 2026?

Bitcoin rose to $66,180 on July 23, then fell back to trade around $65,975.

Q: Why didn’t geopolitical conflict boost Bitcoin’s price?

The traditional logic suggests geopolitical conflict would trigger safe-haven demand and push up Bitcoin’s price, but the market performance in July 2026 was the opposite. The root reason is: conflict in the Strait of Hormuz pushed up oil prices → inflation expectations heated up → the market expected the Federal Reserve to hike rates → rising real interest rates suppressed risk assets. In this logic chain, the market classifies Bitcoin as a risk asset rather than a safe-haven asset.

Q: What level is the total crypto market cap currently at?

On July 23, 2026, the global total crypto market cap was about $2.26 trillion, down more than 52% from the historical peak of $4.27 trillion set in October 2025.

Q: How are the fund flows for U.S. spot Bitcoin ETFs trending?

On July 22, U.S. spot Bitcoin ETFs recorded a net inflow of $203.2 million, marking positive growth for the sixth consecutive trading day. But the accumulated net outflow from May to June is about $6.9 billion, and the current scale of inflows remains quite limited.

Q: What impact does rising oil prices have on the domestic crude oil futures market?

On July 23, 2026, in China’s domestic commodity futures market, the main crude oil contract rose by more than 4%; fuel oil rose by more than 3%; and products including styrene, palm oil, lithium carbonate, plastics, and others rose by more than 2%.

Q: What level were U.S. Treasury yields at on July 23?

On July 23, 2026, the yield on 2-year U.S. Treasuries rose to 4.301%, the highest level in more than a year; the 10-year Treasury yield was near 4.66%. The rise in yields reflects the market’s repricing of inflation and rate hikes.

Q: What key variables should the crypto market focus on next?

Three variables should be closely watched: the evolution of the geopolitical situation in the Strait of Hormuz (which determines the oil price trend), the Federal Reserve’s July 29 rate decision (which determines whether rate hikes actually take effect), and the subsequent impact of rising oil prices on July inflation data. The combination of these three variables will determine the direction and strength of short-term macro pressure on the crypto market.