Crypto traders are increasing their bets that oil prices will surge above $100 as markets begin to price in a prolonged war between the U.S. and Iran. Bitcoin and the broader crypto market have notably declined today as the oil market rises to multi-year highs.
Oil Prices To Rally Above $100 This Month: Polymarket
Polymarket data shows a 61% chance that crude oil could reach $105 by the end of March. This comes as oil is now expected to rally to $100 this month, with a 71% chance of that happening. The rise in these odds follows today’s gains in the oil market, with Brent crude oil and U.S. crude oil prices rising above $90, marking multi-year highs for these oil benchmarks. Qatar also warned that disruptions in oil production in the Gulf region could send prices to as high as $150 within weeks.
As CoinGape reported, Bitcoin fell below $70,000 today as oil prices surged above $90. TradingView data shows that the leading crypto is currently trading at around $68,200, down almost 4% on the day. With this latest decline, BTC has now erased almost all the gains it recorded earlier this week, when it rose to $74,000.
Meanwhile, the rise in oil prices continues to spark inflation fears, especially with the possibility that the U.S.-Iran war could last longer than expectations. Rising inflation could force the Fed to hold rates steady or even hike rates, which is bearish for BTC and the broader crypto market.
As CoinGape reported, Trump rejected any Iran deal, stating that the only deal he will accept is an unconditional surrender. This again signaled that tensions could continue to rise in the short term, as Iran has made it clear that it is not looking to negotiate a peace deal.
Polymarket data shows only a 27% chance of a U.S.-Iran ceasefire by March 31. As markets continue to price in a prolonged war, crypto prices risk a larger decline, similar to the sell-off that occurred about a month after the Ukraine war began.
Price Shock Unlikely To Lead To Sustained Inflation
During a Bloomberg interview today, Fed Governor Chris Waller stated that the rise in oil prices is unlikely to lead to sustained inflation or warrant a change in monetary policy. He further remarked that the Fed expects the price shock to be short-lived, lasting for just a couple of weeks or two months at most. “It’s not going to be a big factor down the road,” Waller affirmed.
Former U.S. Treasury Secretary Janet Yellen warned earlier this week that the rising oil prices could drive inflation higher. She also stated that the Iran war is likely to make the Fed more reluctant to lower rates.
However, Waller believes that the Fed should make additional rate cuts given labor market conditions. The U.S. jobs report, released today, signaled that the labor market remains weak, with the U.S. losing 92,000 jobs in February, while the unemployment rate rose to 4.4%, above expectations of 4.3%.
Fed President Beth Hammack said the Fed should hold off on cutting rates for now, noting that inflation remains too high. However, she opined that there are still two-sided risks to interest rates.
