Bitcoin and global stock markets showed signs of recovery after sharp sales at the beginning of the week. In the early days of the escalating military tension between the USA, Israel and Iran, oil prices rose rapidly, putting pressure on risky assets. On the other hand, in the later part of the week, Bitcoin rose above 70 thousand dollars and gained approximately 10 percent in value on a weekly basis. S&P 500 futures contracts also reacted upwards from the low levels seen during the week.
The initial reaction in the markets weakened after geopolitical tension
The first wave in the markets was shaped by news of disruptions to oil tankers passing through the Strait of Hormuz. Developments on this route, which is considered critical for global crude oil supply, pushed energy prices up and pushed investors into a more defensive position for a short time. Later, the panic in the markets partially calmed down after the USA announced that it would provide sea escort and political risk insurance support for tanker crossings. In this process, Bitcoin recovered from the level of approximately 65 thousand dollars at the weekend and tested levels close to 74 thousand dollars on Wednesday.
A similar picture stood out on the stock side. S&P 500 futures rose to around 6,840 points again after falling to 6,718 points on Tuesday. This recovery in risk appetite showed that investors shifted to a more selective but not completely avoidant attitude after the first shock. It was observed that purchases in the cryptocurrency market gained strength again in the same period.
The rise in bond yields changed Fed expectations
On the other hand, the bond market displays a more cautious outlook. The US 10-year bond interest rate increased for four consecutive days, from 3.93 percent to 4.15 percent. The 2-year bond rate, which is more sensitive to interest rate expectations, increased from 3.37 percent to approximately 3.60 percent. The increase in bond yields highlighted the view that the rise in energy prices may re-intensify inflation pressure, which may cause the Fed to act more slowly regarding interest rate cuts.
Wintermute trader Bryan Tan stated that the interest rate market revealed the fundamental tension in this rise, and that the resilient economy and energy-related inflation pressure created a basis that could keep the Fed on hold for a longer time.
According to interest rate futures, investors’ probability of two 25 basis point Fed rate cuts this year has dropped below 50 percent. Before the tension started, this rate was around 80 percent. US President Donald Trump’s official nomination of Kevin Warsh to the Senate to chair the Fed also added an additional layer of uncertainty to the monetary policy outlook. Warsh has previously served on the Fed Board of Directors and is known as a name closely followed in monetary policy discussions.
All eyes are on employment and wage data
The latest macroeconomic data from the USA also supported the rise in bond interest rates. While the ISM index showing February activities in the service sector increased to 56.1, ADP private sector employment data indicated an increase of 63 thousand people in the same month. This picture showed that the resilient outlook in the economy was maintained and interest rate cut expectations were priced more cautiously.
Analyst Jack Prandelli emphasized that after major geopolitical shocks, oil prices often rise gradually over weeks, while markets sometimes underprice the first stage of supply risk.
Attention now turns to non-agricultural employment and wage growth data. A data set that exceeds expectations could further weaken expectations for the Fed’s interest rate cuts and create new volatility in both stocks and cryptocurrencies. Therefore, although the recovery in Bitcoin continues, signals from the bond market show that the cautious stance has not completely disappeared in the short term.
