As we enter the seventh day of the US/Israel – Iran conflict that has now spiralled into a broader regional conflict, energy supply, and more specifically, the price of oil is back in focus. On March 5, Iran struck a U.S. oil tanker close to Kuwait and Bahrain’s largest oil refinery, BAPCO, was also targeted. These escalations and attacks have severely disrupted shipping through the Strait of Hormuz, a critical passageway that accounts for 20% of global oil supply. As shipping traffic is down over 90% over the past week, uncertainty around how long these disruptions could last has resulted in oil prices rising close to 20% since the start of the conflict, while gas prices in the U.S. now sitting at around $3.32 per gallon, up 30 cents in a single week.
President Donald Trump’s response was blunt at first stating that “if they rise, they rise” to Reuters and ruled out the possibility of tapping into the Strategic Petroleum Reserve. Yet within hours, Washington made a move that would have been unthinkable a couple of months ago by issuing a 30-day waiver allowing India to purchase Russian oil already stranded at sea in order to keep global supply flowing.
This move was a clear signal that policymakers are worried about how quickly the current energy shock could spiral into a full blown inflation crisis. That inflation chain is what will ultimately shape Bitcoin’s next move. Since the attacks transpired on February 28, Bitcoin has actually held up well, trading roughly 10% higher and reaching a high of $74K on March 4. According to data from SoSo Value, Spot ETF net flows since the start of the conflict have actually been net positive of about $917 million. At the same time, markets saw a large volume of short liquidations on March 4 with over $470 million short positions wiped out.
Now while this geopolitical shock might have brought attention back to Bitcoin’s “digital gold” thesis and a means for capital flight, the same conflict is also pushing oil prices higher, keeping inflation elevated and limiting how fast the Federal Reserve can cut rates. With markets pricing a near-certain hold at the current 3.5% – 3.75% policy range, the conflict has created a paradox: the geopolitical shock helping Bitcoin rally may also be the exact force that caps how far the rally can go.
Oil at $85, Gas up 27 Cents, and Trump Won’t Tap the SPR
Energy markets have been one of the first places where the economic fallout of the conflict is being felt. Brent crude closed yesterday at $85.41 rising 4.93% on the day after Iran said it struck an American oil tanker in the Persian Gulf. At the same time, U.S. benchmark WTI rose 8.51% to $81.01, its highest level since July 2024. The uncertainty around the Strait of Hormuz and the global supply of oil is already having a direct impact on gasoline prices in the United States. AAA has reported that the national average gasoline price in the United States is up 30 cents in a single week and now averaging at around $3.32 per gallon.
Despite the sharp increase in gas prices today, President Donald Trump stated that the administration had no intentions of tapping into the Strategic Petroleum Reserve (SPR). In an interview with Reuters on March 5, Trump said gas prices would likely fall once the conflict ends, adding, “if they rise, they rise”, while emphasizing that ensuring security in the region and keeping the Strait of Hormuz open was the utmost priority.
The situation on the ground, however, remains extremely fragile. Multiple tankers near the passageway have already been targeted with strikes and Iran’s Revolutionary Guard has warned that unauthorized vessels entering the region run the risk of becoming “legitimate targets”. With commercial shipping through the passage effectively paused, analysts warn that if the disruption continues, oil prices could continue climbing, potentially pushing Brent crude toward triple-digit levels and reviving the kind of inflation shock last seen in 2022.
The U.S. Just Eased Russia Sanctions – Because the Oil Crisis Is That Bad
On March 5, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) issued General License 133, a 30-day waiver from March 5 to April 4 that allows Indian refiners to receive Russian crude that had already been loaded onto vessels before the cutoff date. This authorization covers the complete set of maritime services needed to complete those deliveries to Indian ports which include sale, delivery, offloading, bunkering, crewing, insurance and port services.
Treasury Secretary Scott Bessent was quick to address the measure as a short term step to prevent oil stranded at sea from disappearing from global markets and emphasized that it would “not provide significant financial benefit” to Russia because the waiver only applies to cargoes already in transit.
The broader context actually makes the move significant. In 2025, India accounted for around one-third of Russia’s seaborne oil shipments. That said, these figures have already fallen sharply by around 34% YoY in January-early February 2026 due to sanctions. By allowing those shipments to be delivered, Washington has effectively shown how severe the current supply shock has become. In a matter of one week, the conflict has already disrupted a significant portion of energy flows across the globe. This has prompted policymakers to prioritize keeping oil moving, even if that means temporarily loosening restrictions on a geopolitical rival.
The Fed is Trapped – 97.3% Chance of No Rate Cut While Inflation Climbs
Rising energy prices are now placing inflation expectations and monetary policy forecasts back into the fray as well. According to the CME FedWatch tool, the probability of the Federal Reserve holding interest rates steady at 3.5% – 3.75% at the next FOMC meeting set for March 18 is at 97.3%. This means the chance of a rate cut is practically off the table while inflation remains sticky at 3%, above the central bank’s goal of 2%. Apart from this, the producer price index is also showing pressure with core PPI rising 0.8% month over month and 3.6% year over year in January, higher than expectations. Increasing oil prices now adds a completely different dynamic for policymakers to grapple with as a persistent energy shock could push inflation higher and ultimately push back any chances of a looser monetary policy.
The chain reaction is easy to understand: higher oil prices push up the cost of gas, which in turn raises transportation and goods costs, which then feeds into adding pressure to headline inflation. Historically, every $10 increase in crude oil prices has resulted in a roughly 25 cent rise at the pump. This means if oil prices continue to go up for longer, this could very well quickly spill into consumer inflation.
There is, however, a competing thesis within the crypto market. BitMEX co-founder Arthur Hayes has argued that nearly every major U.S. military conflict in the Middle East since the 1980s has eventually been followed by rate cuts and liquidity expansion, as economic damage forces policymakers to intervene. In his view, the war itself is not the trigger, the trigger is the slowdown it eventually causes. Hayes believes that if the conflict meaningfully weakens economic growth, the Federal Reserve could ultimately be forced to loosen policy again, potentially driving Bitcoin toward a $500,000–$750,000 long-term price range. For now, however, the immediate focus is on the March 18 FOMC meeting, where markets expect the Fed to hold rates steady while watching closely for any signals about when, or if, the first rate cuts might arrive.
What This Means for Bitcoin at Its Make-or-Break Resistance
Bitcoin’s rally over the past week has been commendable given the circumstances, but it now sits at a critical technical market structure. After initially falling to a low of $63K as the news broke out on February 28, the asset rebounded sharply and climbed to a high of $74.1K, representing a 17% rise from lows to highs. Spot ETF inflows and short squeeze dynamics in derivatives markets have helped push prices higher in recent days.
However, since reaching the $74K region however, Bitcoin has retraced by around 4.5% back into the mid $70K region. So far, the price action reinforces the fact that the $73-74K region remains to be a key resistance area to overcome. For context, this is a region that marked a local low in April last year which has now flipped into resistance. If the geopolitical shock eventually leads to economic damage severe enough to force the Federal Reserve into rate cuts, the thesis promoted by macro investors like Arthur Hayes, Bitcoin could be positioned for a much larger breakout.
The bearish case, however, is just as clear. Rising oil prices and the inflation pressure they create could keep the Federal Reserve on hold for longer, limiting liquidity for risk assets. Some analysts have argued that the recent move was likely triggered by short positioning rather than institutional buying. For instance, Mark Connors of Risk Dimensions described the rally as “clearly a flushing of shorts”. Market makers are also signalling caution. Derivatives firm Enflux says “the market is not pricing catastrophe, but it is not pricing resolution either. So far, this sentiment seems to be an accurate assessment based on BTC’s recent price action. The failure to reclaim the key $74K region on the daily timeframe suggests that the market remains locked in the same macro tug of war between geopolitics, inflation and liquidity.