Middle East Clashes Lift Oil, U.S. Yields; Bitcoin Drops

Renewed fighting in the Middle East led to military action in and around the Strait of Hormuz, a key shipping channel for roughly 20% of global oil flows. U.S. Central Command reported it intercepted missiles and drones and carried out “self-defense strikes” on an island in the strait after missiles were fired in the region.

Futures for Brent crude rose to about $96 a barrel, reaching a 12-day high on concern about potential supply disruption. The U.S. 10-year Treasury yield climbed to 4.5% as investors priced higher near-term inflation risk. Equity markets moved lower, with the Nasdaq trading about 1% below its record close, the S&P 500 down about 0.8%, and the Dow Jones Industrial Average off more than 430 points.

Cryptocurrency markets weakened alongside stocks. Bitcoin dropped roughly 2.4% midday to about $65,700, its lowest level since late March. Ethereum and Solana each fell about 5%, trading near $1,830 and $72. Bitcoin has declined about 10% for the month, from roughly $74,000 to the mid-$65,000s.

The crypto sell-off followed an 8-K filing from Strategy, the Bitcoin treasury firm associated with Michael Saylor, which disclosed it sold 32 BTC for about $2.5 million — its first sale since 2022. The disclosure prompted debate among retail traders and analysts and added selling pressure in an already fragile market.

Carlos Guzman, vice president of research at GSR, noted that higher oil prices and the prospect of near-term inflation pushed yields up and weighed on demand for risk assets. He said traders were placing higher odds on an interest-rate increase rather than a cut from the Federal Reserve, a shift that coincided with declines in technology stocks and cryptocurrencies.

Analysts at Compass Point described the recent drop in Bitcoin as a “capitulation event” and highlighted that 26% of sales over the past 320 days came from investors who had purchased above the $90,000 level.

Market participants were watching for further military developments around the Strait of Hormuz and any signs of supply interruption, as well as central bank signals on the path of interest rates, both of which could influence oil prices, bond yields and demand for higher-risk assets.