Bitcoin trades at $78,087, down 0.5 percent in 24 hours, as military escalation in the Middle East drives oil prices higher and chokes off capital flows into risk assets.
Brent crude blew past $100 per barrel for the first time since July 2 after U.S. Central Command confirmed it destroyed five Iranian crude oil carriers on Sept. 8. The strike followed Iranian ballistic missile attacks on a U.S. Navy warship. West Texas Intermediate topped $95 per barrel. Brent has climbed over 10 percent since Aug. 30.
Three days before the Sept. 8 action, U.S. forces destroyed three additional Iranian oil tankers after Islamic new Guard Corps attempts to target U.S. warships. Reports from the region indicated three more tankers were hit by suspected Iranian drones near Dubai, Kuwait and Qatar immediately after the U.S. strikes.
The oil surge hit risk assets hard. European indices tumbled—the DAX dropped over 400 points, a 1.62 percent decline. The 2-year U.S. Treasury yield rose 2 basis points to 4.423 percent as markets priced in inflation risk from sustained energy prices.
Bitcoin had recovered from a Tuesday low of $77,603 and was eyeing $80,000 before the fresh clashes hit. It touched a session high of $79,742 before slipping below $78,800.
Marc Ostwald, chief economist and global strategist at ADM Investor Services in London, said higher energy prices create headwinds to economic growth. "Rates and FX markets are facing an ever more complex environment, with the risks of high energy prices spilling over more broadly in inflation terms, but in turn also increasing the risks of growing headwinds to growth and demand destruction," Ostwald said.
Diplomatic channels between the U.S. and Iran remain frozen. Tehran has warned of harsher retaliation to any future Western military action, creating an open-ended risk to global oil supply and a structural headwind for Bitcoin as long as geopolitical tension dominates price discovery.
