Rising tensions in the Middle East are creating divergent moves across global markets. Oil prices have surged while traditional safe havens, including gold and equities, face pressure.
Expectations for Federal Reserve policy have shifted sharply in just weeks. Markets that once priced in multiple rate cuts in 2026 are now seriously factoring in potential hikes. According to the CME FedWatch Tool, there is nearly a 30% chance that the federal funds rate will end the year above the current 3.50%–3.75% range, while the likelihood of a rate cut has dropped to just 2.9%.
Energy markets are driving much of the shift. Since late February, Brent crude has risen from roughly $70 per barrel to $111, pushing long-term Treasury yields higher. The 10-year yield has climbed to 4.40% from below 4% in recent weeks.
“Food and energy prices are likely to stay elevated for some time, at least until Middle East shipping issues are resolved,” said the Crypto is Macro Now newsletter. Core inflation was already above the Fed’s 2% target before oil’s spike, with February printing 2.5% year-over-year. Longer-term expectations also remain elevated, with 5-year and 10-year measures at 2.5% and 2.3%, respectively.
Despite these pressures, the U.S. economy could see offsetting benefits. Higher energy prices support net exports, and increased military spending adds stimulus, helping GDP avoid a sharp contraction.
Bitcoin vs. traditional assets
Bitcoin has held roughly steady in the $65,000–$70,000 range, appearing resilient since the Iran conflict escalated. By comparison, gold has fallen about 20%, and the Nasdaq entered correction territory Friday after dropping more than 10% from its 2026 highs.
However, context matters. Gold had more than doubled over the past year, and the Nasdaq was up 50% from its April 2025 lows. Bitcoin remains about 50% below its October 2025 peak, showing that over longer time frames it continues to underperform major assets like stocks and gold.
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