Iranian ship attacks in the Strait of Hormuz and drone strikes on the Fujairah oil industry have caused Brent crude oil to drop to $114.44 and WTI to $106.42, while 10-year Treasury yields have risen to about 4.44% and 30-year Treasury yields have topped 5%.
Bitcoin hit an intraday high of $80,717.66 on May 4, testing its macro identity as a hedge against financial turmoil and as a liquidity-sensitive asset that struggles as yields rise and cash becomes more attractive.
As the 10-year interest rate approaches 4.5%, mortgage interest rates, stock valuations, and corporate borrowing will all be tightened accordingly. Freddie Mac had its 30-year fixed mortgage rate at 6.30% as of April 30, already up from 6.23% the previous week.
When interest rates on 10-year bonds rose to 4.39% in late March due to changes in yields caused by the war, mortgage interest rates jumped to 6.38%, and rose to 6.46% in early April as concerns about interest rate increases grew.
The median 12-month forecast for the 10-year Treasury yield is about 4.26%, according to a survey of strategists, and the market is already trading about 20 basis points above that level.
With around 20% of the world’s oil and LNG supplies passing through the Strait of Hormuz, the market reaction quickly spread from crude oil to interest rates.
Eurasia Group warned that without a deal to reopen the Strait of Hormuz, U.S. gas prices could reach $5 a gallon, compared with AAA’s national average of $4.457 as of May 4. Both numbers represent inflation risks that affect interest rate expectations and complicate the Fed’s position.
Fed problems
Barclays has pushed back its forecast for the Fed’s first rate cut to March 2027, and CME FedWatch said traders see a roughly 78.7% chance of no change until the end of 2026.
With oil holding above $100, inflation has become sticky enough that the Fed cannot cut interest rates to cushion risky assets, eliminating one of the cleaner tailwinds that Bitcoin has benefited from in recent cycles.
Two forces are pushing up long-term bond yields. While the energy shock will boost inflation expectations, the Treasury’s own borrowing calendar will exacerbate this dynamic. The Treasury Department currently expects to borrow $189 billion in the second quarter and $671 billion in the third quarter.
The bond selloff has a longer shelf life than any Iran headlines, as increased supply to a market that is already pricing in inflation risk will keep yields rising even as the geopolitical premium fades.
The IMF’s Kristalina Georgieva said on May 4 that the IMF’s reverse scenario had already materialized, warning that oil prices could reach around $125 if the conflict extends into 2027.
The Chevron CEO added that given that Hormuz handles one-fifth of the world’s crude oil, physical shortages will start to appear.
The United States is releasing up to 92.5 million barrels from the Strategic Petroleum Reserve as part of a broader IEA effort, but oil prices continued to rise and gasoline prices continued to rise. These numbers indicate that policy responses to remove the inflation premium from long-term interest rates are insufficient.
| driver | Article content | Why pricing matters |
|---|---|---|
| oil shock | Due to Iran-related escalation, Brent $114.44 And to WTI $106.42 | Inflation expectations rise due to rising energy prices |
| holmes confusion | About 20% The world’s oil and LNG supplies pass through the strait. | Supply risk turns geopolitical events into macroinflationary events |
| Fed on hold | Barclays has revised its initial rate cut forecast to: March 2027; FedWatch indicates there is likely no change until the end of 2026 | The Fed has less room to ease risk assets |
| National treasury borrowing | Treasury expects to borrow $189 billion 2nd quarter and $671 billion in the third quarter | Increased supply puts further pressure on long-term interest rate yields |
| Policy compliance limitations | Released in the US at maximum 92.5M Barrels increased from SPR, but crude oil holdings increased | The market suggests that the response may not be enough. |
Bitcoin contradiction
Bitcoin’s hard money litigation reinforces an environment of war risks, energy inflation, rising government debt, and doubts about monetary accommodation, all of which support the argument that fiat systems are becoming harder to manage and more expensive to operate.
BlackRock’s IBIT had net assets of $63.53 billion as of May 1, and the U.S.-traded Spot Bitcoin ETF recorded inflows of $630 million on the same day. Institutional sponsorship of this size reflects the enduring view that Bitcoin belongs in a portfolio exposed to macro-disorder.
Gold’s movements on May 4 complicate the situation. Despite the escalating situation in Iran and soaring oil prices, gold fell 2% due to a strong dollar and hardening expectations for high interest rates.
A stronger dollar and more attractive cash yields could overwhelm traditional hedging bids in the short term, and gold’s lack of technology and adoption risk makes it a cleaner comparison.
The fact that Bitcoin is holding $80,000 despite the 10-year yield being close to 4.45% would confirm that institutional capital flows are making Bitcoin less sensitive to interest rates. A break above this level would reinforce the view that BTC will still function as a liquidity-sensitive risk asset even if real-world yields rise and the dollar strengthens.
what to expect
In a bullish case, the geopolitical risk premium for oil needs to fade.
As the transportation situation improves and normal traffic resumes in Hormuz, yields are returning to around the median of 4.25% to 4.30%.
In this setup, the institutional infrastructure already in place comes into play, as IBIT’s size and ETF inflows give Bitcoin a strong bid. The hard money theory has survived the interest rate test and the market has reset the price of BTC towards its recent range without fighting the ongoing bond sell-off.
Bitcoin’s structural buyer base, including corporate bonds, ETF flows, and sovereign-adjacent capital, will have more room to accumulate at current levels.
The bearish case develops if oil prices remain around $110 to $125, long-term yields decisively exceed 4.5%, and the inflation premium on interest rates persists long enough for the Fed’s long-term interest rate hikes to dominate the market through 2026.
In that environment, Bitcoin trades like a liquidity-sensitive asset, especially if the dollar continues to rise and gold continues to return a hedging premium.
Even if tensions with Iran cool down, the Treasury supply picture reinforces bearish sentiment as $671 billion in third-quarter borrowings will maintain upward momentum in the long term, narrowing the room for liquidity-driven gains in Bitcoin.
Bitcoin’s long-term hard money theory survives the Fed’s long-term holdings, but holding $80,000 while 10-year yields are near 4.45% and oil is trading above $100 would require either the bond market to stop tightening financial conditions or there would have to be enough institutional inflows to absorb the interest rate headwinds.
(Tag translation) Bitcoin
