The situation in the Middle East continues to escalate, entering its second week, with Brent crude oil prices surging 26%, raising global energy inflation concerns. The market widely believes that this shock will severely compress the Federal Reserve's room for interest rate cuts. The U.S. government is working to ensure the smooth transportation of oil through the Strait of Hormuz, but actual capacity is limited due to complex logistics and high costs. As a result, some oil fields in Gulf countries, such as Saudi Aramco, have proactively reduced production due to saturated storage capacity, rather than direct interruptions from conflict.
With inflationary pressures intensifying, the market expects the Federal Reserve to only possibly implement one 25 basis point rate cut in the fourth quarter of 2026. Against this backdrop, traditional risk assets are generally under pressure: the S&P 500 fell by 2.0%, the Nasdaq declined by 1.2%, and the Russell 2000 plummeted by 4.0%. In stark contrast, cryptocurrencies have shown strong resilience—Bitcoin slightly increased, Ethereum remained stable, and altcoins only dipped by 0.4%. Although spot trading volumes remain sluggish, institutional participation is quietly rising.
Market volatility (DVOL) remains high around 60, with significant bearish skew still evident, but investors are turning to buy long-term call options, anticipating a recovery in the next 12 to 18 months. Wintermute analysis points out: “The ability to maintain stability in a risk-averse market is a typical characteristic of Bitcoin as a potential store of value.”
Moreover, the overall leverage level in the current crypto market has dropped to about $60 billion, only half of its peak, significantly reducing the selling pressure from forced liquidations. Compared to gold, crypto assets have a lower leverage, resulting in milder declines. Analysts believe that the current price levels are quite attractive for long-term investors, especially when Bitcoin falls below $50,000, potentially forming a more appealing accumulation zone.