The war in Iran has entered its fourth week: oil prices and fears of escalation push stock markets into the red. And the crypto market?
The war between the United States-Israel and Iran has entered its fourth week: the Islamic Republic of Iran has organized to make the Strait of Hormuz impassable, a fundamental chokepoint where a fifth of the world’s oil and LNG production passes. The United States responded with an ultimatum that, apparently, had no effect. Global stock markets, obviously, fear escalation and are feeling the blow. The crypto market follows but seems slightly more solid: what is the situation?
Let’s take a look at traditional markets: performance since the beginning of the war
On the Italian morning of February 28, the United States and Israel officially launched a series of coordinated bombings against Iran: in less than 24 hours, they achieved one of the main goals of the raids, eliminating Ayatollah Ali Khamenei, supreme leader of the Islamic Republic of Iran. A few hours after the event, the Revolutionary Guards, one of the three Iranian armed corps, declared the Strait of Hormuz closed: “If anyone tries to pass, the heroes of the Revolutionary Guards and the regular navy will set those ships on fire”.
In the following days, traffic in the Strait was drastically reduced: media and international security agencies reported the presence of naval mines in the channel. The price of energy commodities, consequently, skyrocketed: between 25% and 30% of global oil and LNG (liquefied natural gas) production passes through the Strait of Hormuz. With the opening of the front, Brent – the international benchmark – rose from $73 a barrel to today’s $103.
But it doesn’t end there: over the weekend of March 20-23, Trump sent an ultimatum promising to “strike and level to the ground” Iran’s nuclear-related infrastructure. The Islamic Republic responded with the classic “an eye for an eye, a tooth for a tooth”: “If you strike electricity, we will strike electricity“.
On Monday, just as we were writing this article, the President of the United States backtracked, enacting the usual behavior that earned him the nickname of TACO: Trump Always Chickens Out. What did he do?
He published a post on his social network Truth where he writes, with a few typos: “I am pleased to announce that the United States of America and Iran have had, over the past two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East”.
“Based on the tenor and tone of these in-depth, detailed, and constructive conversations, which will continue throughout the week”, the POTUS continues, “I have instructed the War Department to postpone any military attack against Iranian power plants and energy infrastructure for a period of five days, provided that the ongoing meetings and discussions are successful”.
In light of this new update, which has completely changed the cards on the table, what is the current situation? Let’s see how traditional markets are behaving from the beginning of the war to today – Monday, March 23.
Major stock indices
When energy prices grow out of proportion, the real economy suffers: companies spend more to produce due to the across-the-board increase in costs, such as transportation and electricity in general. The result: the price hikes, in the end, are passed on to the consumer, who sees a generalized rise in prices, also known as inflation. What does all this mean in numbers?
Starting from the United States where, at the time of writing, markets are still closed, the Dow Jones is shedding 6.8%, the S&P500 5.4%, and the Nasdaq 100 4.4%. The Dow Jones suffers more than the other two precisely because it is more exposed to energy price variations: within it, we find stocks whose value depends heavily on energy costs, such as Boeing (-15%) and Caterpillar (-9.5%).
Note: in the premarket, futures on the same indices indicate, respectively, a gain of +1.6%, +1.58%, and +1.54%: the news of the postponement of the bombings, which we reported just above, is bearing fruit.
But let’s fly to Europe, which is faring even worse: the Eurostoxx 50 (STOXX), the index that includes the top 50 European companies, is losing 8.6% over the same period. In detail, London is down 9.5%, Paris 8.2%, Frankfurt 8%, and Milan 6.6%.
In Asia, too, the situation is not rosy: the Nikkei, which represents the 225 most important companies in Japan, is giving up 8.8%, while the KOSPI, the main South Korean index, 12.3%. In China, even the Hang Seng, which until now had contained losses, marks a 7.3% drop.
Focus on precious metals: gold and silver
In this chaos, one would expect good behavior from precious metals, universally conceived as safe havens in times of strong turbulence. That is not quite the case.
The price of gold, since March 2 (the first trading day since the start of the war), has dropped by almost twenty percentage points (-19%), closely followed by silver (-30%). At the same time, despite not being a precious metal, the dollar returns to assuming a store-of-value role: in these three weeks, the DXY – dollar vs five major foreign currencies – is gaining 1.8%.
And the crypto market?
The crypto market is in sharp contrast to the general trend: since Saturday, February 28, Bitcoin has gained 6.2% and managed to break $70,000 after two attempts – it is now traveling right around $70,000; Ethereum is doing even better with a +10.1%; Ripple and Solana are joining the party, rising by 4.5% and 8.9%, respectively. In general, the Total Market Cap of the sector saw an inflow of almost 130 billion dollars (+5.8%).
Some interesting data
Glassnode tells us that wallets with a balance equal to or greater than 1,000 BTC, since February 28, have increased by 19 units, from 1,264 to 1,283. Put another way, it seems that the so-called whales – those who hold large amounts of Bitcoin – are returning to accumulate.
Complementarily, in the last month, there has been an outflow from exchanges equal to approximately 78,611 BTC. The amount of available Bitcoin is shrinking, with positive consequences for the price, as explained by the law of supply and demand.
If, on the other hand, we shift our gaze toward institutional players, Bitcoin ETFs recorded a net flow – the balance between purchases and sales, that is, between inflows and outflows – of more than 20,100 BTC.
Are we witnessing a capital rotation?
It is the big question that crypto (and non-crypto) investors have been trying to answer for days. Clearly, no one has the answer, because the future cannot be predicted. In these moments, the best thing to do is to study the fundamentals and understand how the protocols work.
Don’t know where to start? Don’t worry: our Academy is excellent for those who want to start, but also for those who are already experts and want to review.
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