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Strait of Hormuz Strikes Flip Bitcoin From Hedge to Risk Asset
Iran missile toward Kuwait and Hormuz drones expose 20% of oil supply. Bitcoin re-enters risk-off as conflict escalation outweighs diplomatic hopes.
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CENTCOM confirmed Iran launched a missile toward Kuwait and deployed five one-way attack drones near the Strait of Hormuz. Kuwaiti forces intercepted the incoming threats. US forces conducted self-defense strikes targeting Iranian missile facilities and naval vessels near Bandar Abbas, downing four drones and hitting a launch site. The event lands on crypto traders' watchlists because roughly a fifth of the world's oil supply passes through that waterway.
Bitcoin’s Price Response: Risk-On Offload, Not Safe Haven
During periods of diplomatic optimism in the US-Iran conflict, Bitcoin surged above $72,000. Fresh military engagements like this one have consistently applied downward pressure. The pattern suggests Bitcoin is currently trading more like a risk asset than a hedge. When bombs fall, traders de-risk, selling crypto alongside equities rather than fleeing into it.
Key insight: The inverse correlation between Bitcoin’s market performance and conflict escalations is the number that matters most right now. A single escalation can reverse weeks of gains.
The Mechanism: Oil, Inflation, and Rate Expectations
The Strait of Hormuz dimension adds another layer. Any sustained disruption to oil transit pushes energy prices higher, feeding into inflation expectations and tightening financial conditions. If central banks are forced to maintain or increase interest rates because of energy-driven inflation, that headwind hits all risk assets, crypto included. Bitcoin, which rallied on hopes of diplomatic progress, now faces the opposite flow. A single CENTCOM press release can move billions in market cap within hours, the economic consequences play out over months.
For more on how geopolitical events affect crypto structure, see our crypto market analysis.