Iran Conflict Fuels Inflation Pressure! Rate Hike Expectations Soar, Bitcoin Holds Steady at 70K

The ongoing military conflict between the United States and Iran has intensified, causing international oil prices to rebound more than 4.5% in a single day, returning above $104 per barrel. The shadow of inflation is resurging, with the Federal Reserve’s probability of rate hikes before July soaring over 20% within a week. U.S. stocks fluctuate, prompting investors to sell risk assets and shift to cash. Bitcoin remains steady around $70,500.

U.S. Stock and Cryptocurrency Market Overview: Middle East Tensions Unclear! U.S. Stocks Fluctuate, Oil Prices Rebound Above $100

The conflict between Iran and the U.S. continues to escalate. Trump claimed on Tuesday that the U.S. has “completely defeated Iran” and stated that negotiations are making progress. However, reports from the Pentagon suggest that thousands of troops may be sent to the Middle East, raising concerns about a prolonged war.

As a result, U.S. stocks fluctuate:

Dow Jones Industrial Average drops 84.41 points (-0.18%), closing at 46,124.06.

S&P 500 Index drops 24.63 points (-0.37%), closing at 6,556.37.

Nasdaq Composite drops 184.87 points (-0.84%), closing at 21,761.89.

Philadelphia Semiconductor Index rises 99.58 points (+1.28%), closing at 7,872.71.

Oil prices, meanwhile, surged over 4.5% in a single day, with Brent crude rebounding above $104 per barrel. U.S. West Texas Intermediate (WTI) also recovered to around $92 per barrel.

Rate hike hopes shattered, expectations of rate cuts reignited

Rising oil prices have fueled inflation expectations. The CME FedWatch Tool shows that the implied probability of the Federal Reserve raising interest rates before July has skyrocketed from zero to 20.5% within a week. The likelihood of rate hikes before the end of the year exceeds 30%, while market expectations for rate cuts this year have nearly disappeared.

Source: FedWatch

The five-year U.S. Treasury yield also surged to 4.10%, a nine-month high, indicating that investors are rapidly repricing future funding costs. Cash remains the preferred defensive asset, dominating market sentiment.

(Gold drops below 4,500! Stocks, bonds, and gold all decline— is cash still the safest haven?)

Tech stocks plunge, energy sector outperforms as the strongest sector this year

The tension in the Middle East and the pressure from rising interest rates are also reflected in the tech sector. Major tech giants like NVIDIA, Google, Meta, Microsoft, Amazon, and Tesla have seen stock declines ranging from 7% to 23% this year. In contrast, the energy sector has performed strongly, with gains of 30% to 65% so far this year.

Source: TradingView

With U.S. national debt surpassing $39 trillion and Congress debating an additional $200 billion military budget, fiscal pressures may further limit the Federal Reserve’s room for quantitative easing (QE).

Bitcoin tests support levels again, with increased risk of breaking below $66,000

Meanwhile, Bitcoin retested the $67,500 support on Monday, then rebounded and stabilized around $70,500. Gold prices also experienced their most severe single-day decline in nearly fifty years. The recent weeks or even months’ price movements of both assets clearly reveal a rapid deterioration in market risk appetite.

Chain News believes that, before inflation shows signs of cooling and the Iran-U.S. conflict shows no signs of ending, fundamental support is unlikely to withstand macroeconomic pressures. The upward momentum may be difficult to sustain.

This article “Iran War Fires Up Inflation Pressure! Rate Hike Expectations Surge, Bitcoin Holds Steady at $70K” first appeared on Chain News ABMedia.