Bitcoin and global equity markets have shown signs of recovery following a sharp decline earlier this week, which was driven by rising oil prices and escalating military tensions involving the U.S., Israel, and Iran. Despite this rebound, the bond market is signaling caution due to increasing yields that raise concerns about inflation and reduce expectations for Federal Reserve rate cuts.
As of Friday, Bitcoin, the leading cryptocurrency, was trading above $70,000, marking a nearly 10% increase for the week. Prices had briefly surged to almost $74,000 on Wednesday after dipping to around $65,000 over the weekend amid geopolitical unrest.
Equity futures also reflected this recovery. Contracts linked to the S&P 500 fell to a multi-week low of 6,718 points on Tuesday but bounced back to approximately 6,840 points.
The initial market downturn was triggered by a spike in oil prices following reports that Iran had obstructed oil tankers in the Strait of Hormuz, a vital route for global oil supply. The U.S. quickly intervened, offering naval escorts and political risk insurance for tankers, which helped stabilize the markets.
However, the bond market remains unsettled. The yield on the 10-year U.S. Treasury note has increased for four consecutive days, rising from 3.93% to 4.15%. In contrast, the two-year yield, which is more sensitive to interest rate expectations, has jumped from 3.37% to nearly 3.60%. This upward trend in yields indicates that traders are reevaluating the monetary policy outlook as the conflict-driven rise in energy prices could reignite inflationary pressures.
According to CME Fed funds futures, the likelihood of two 25-basis-point rate cuts by the Federal Reserve this year has dropped to less than 50%, down from nearly 80% prior to the conflict.
“The rates market is revealing the tension in this rally,” said Bryan Tan, a trader at Wintermute, highlighting the implications of rising yields.
Tan noted that the current situation reflects a historical trend where a resilient economy coexists with inflationary shocks, which can lead to prolonged inaction from the Fed. The nomination of Warsh, which is set to be discussed in the Senate this week, adds another layer of uncertainty.
Analysts point out that the inflationary effects of oil price shocks typically unfold gradually, suggesting that yields may remain elevated in the coming weeks, potentially limiting the upside for risk assets like stocks and cryptocurrencies.
“After major geopolitical shocks, oil prices usually rise gradually for weeks,” analyst Jack Prandelli commented, noting that historical patterns indicate oil prices can climb 20–30% within approximately 60 days following such events.
Recent strong economic indicators from the U.S. have also contributed to the rise in yields and the reduction in rate-cut expectations. Data released on Tuesday showed continued expansion in the U.S. services sector, with the ISM index rising to 56.1. Additionally, the ADP payroll report indicated the creation of 63,000 jobs in February, the highest figure since July 2025.
Looking ahead, attention is focused on the upcoming nonfarm payrolls report and wage growth data. A stronger-than-anticipated report could further diminish expectations for Fed rate cuts and introduce additional volatility into financial markets.
Bitcoin and stocks have rebounded after a mid-week sell-off due to geopolitical tensions, while the bond market shows caution amid rising yields. Economic data suggests inflation concerns may linger, impacting future Federal Reserve rate decisions.