Middle East tensions are reshaping global markets as oil prices climb and traditional safe havens face pressure.
Expectations for Federal Reserve policy have shifted sharply. Weeks ago, markets priced in multiple rate cuts for 2026; now, rate hikes are on the table. The CME FedWatch Tool shows nearly a 30% probability that the federal funds rate will end the year above the current 3.50%–3.75% range, while the chance of a rate cut has fallen to just 2.9%.
Energy markets are a key driver. Since late February, Brent crude has surged from roughly $70 to $111 per barrel, pushing the 10-year Treasury yield to 4.40% from below 4%.
“Food and energy prices are likely to remain elevated for some time, at least until Middle East shipping is restored,” said the Crypto is Macro Now newsletter. Core inflation was already above the Fed’s 2% target before the oil rally, with February printing 2.5% year-over-year. Longer-term inflation expectations remain elevated, with 5-year and 10-year measures at 2.5% and 2.3%, respectively.
Despite inflation pressures, the U.S. economy may benefit from higher energy export revenue, and rising military spending could provide additional stimulus, supporting GDP.
Bitcoin vs. traditional assets
Bitcoin has stayed largely in the $65,000–$70,000 range, showing resilience since the Iran conflict escalated. Gold, by contrast, has dropped about 20%, while the Nasdaq entered correction territory Friday after falling more than 10% from its 2026 highs.
Yet over longer time frames, Bitcoin continues to lag. Gold had more than doubled over the past year, and the Nasdaq was up 50% from April 2025 lows. Bitcoin remains roughly 50% below its October 2025 peak, highlighting that despite short-term stability, it continues to underperform major assets like stocks and gold.
