Oil prices break $116, the Federal Reserve's rate cut dream shatters: Is Bitcoin's "hedging logic" being rewritten?

By the end of February 2026, the U.S. and Israel launched a military strike against Iran, and the situation in the Middle East suddenly escalated. On March 2, Iran officially announced the blockade of the Strait of Hormuz—this maritime lifeline, which carries about 20% of global oil shipments, was “throttled” as a result. By the end of March, the strait’s average daily crude throughput had plunged by nearly 90%, and six countries including Saudi Arabia and Iraq were forced into passive production cuts of more than 9 million barrels per day. In March, the Intercontinental Exchange (ICE) Brent crude oil futures price recorded a more than 60% month-over-month record monthly increase. Brent spot prices briefly surged to 141.36 U.S. dollars per barrel, the highest level since the 2008 financial crisis.

Just as the market was still digesting the energy shock, another chain reaction began to emerge: the Federal Reserve’s monetary-policy path was completely rewritten, and bets on rate cuts in 2026 nearly disappeared. Amid this macroeconomic upheaval, Bitcoin displayed price behavior entirely different from gold, prompting the market to reassess the “digital gold” safe-haven narrative yet again.

Structural Break: Why Do Traditional Safe-Haven Logic Fail at the Same Time?

Gold and U.S. debt have long been two “safe havens” for global capital during risk events. However, in this Strait of Hormuz blockade incident, the two’s traditional safe-haven functions were eroded at the same time. Spot gold fell by more than 11% in March alone. On April 3, it continued to face pressure. Gold closed at 4,676.86 U.S. dollars per ounce, down 81.40 U.S. dollars on the day. Meanwhile, the yield on the benchmark 10-year U.S. debt climbed to 4.45%, and the real rate (10-year TIPS) rose to 1.97%. This price action shattered the usual expectations that “war is good for gold” and that “funds flow into U.S. Treasuries.” The structural reason behind it is that the core transmission mechanism of this shock is not driven by traditional safe-haven demand. Instead, it comes from the double pressure of “inflation and interest rates” caused by an energy-supply disruption. When soaring energy prices raise inflation expectations, the market begins pricing in the idea that the Federal Reserve will be forced to keep interest rates high—or even raise them further. This sharply increases the opportunity cost of holding gold, while U.S. debt is met with selling pressure due to rising expectations for interest-rate increases. The simultaneous pressure on gold and U.S. debt during this crisis indicates that the traditional safe-haven framework is undergoing a profound structural break.

Double Pressure: How Do the Oil Price Shock and Hawkish Signals Form a Negative Feedback Loop?

A tight causal chain is forming between geopolitical shocks and monetary-policy expectations. Iran’s blockade of the Strait of Hormuz leads to a daily disruption of about 20 million barrels of oil transport, accounting for 48% of global crude-oil trade and 20% of global daily oil consumption. The head of the International Energy Agency warned that the daily supply loss caused by this conflict has reached 12 million barrels, exceeding the combined totals of the two oil crises in 1973 and 1979 as well as the Russia-Ukraine conflict in 2022. It is also expected that the oil shortage in April will be twice that of March. The surge in oil prices directly lifts inflation expectations, and the euro zone’s inflation rate has already risen to 2.5% in March. Against this backdrop, the Federal Reserve’s hawkish stance continues to be strengthened. The New York Fed president said clearly that he is “still inclined to keep rates unchanged,” and the Fed chair also said that monetary policy is “in a favorable position.” Market bets on rate cuts in 2026 have almost completely disappeared. Previously, the interest-rate swap market even priced in the possibility of the Federal Reserve raising rates before the end of the year. The oil price shock and hawkish signals create a negative feedback loop: oil rises → inflation expectations move higher → the Federal Reserve stays hawkish → risk assets come under pressure → expectations of economic slowdown strengthen → supply and demand become even more imbalanced. The self-reinforcing nature of this cycle is profoundly changing the pricing environment for all asset classes.

A Cost List: The Hidden Costs to the Global Economy Are Accelerating

The impact caused by the Strait of Hormuz blockade goes far beyond the oil-price figures themselves. From the perspective of supply-chain transmission, as of the end of March, refinery operating rates in major consuming countries such as India and Japan and South Korea had already fallen by 8 to 15 percentage points. The International Energy Agency has agreed to release 400 million barrels of strategic oil reserves, but that is equivalent to 7% of global demand. Meanwhile, the actual shock to global demand from the strait’s shipping disruptions is 15% to 17%—“not enough to cover the huge gap.” U.S. regular gasoline prices have already crossed the psychological threshold of 4 U.S. dollars per gallon. If they remain at this level for the long term, households across the United States would spend an additional more than 1,000 U.S. dollars per year. Even more worth focusing on is the time dimension of capacity recovery: even if the fighting ends in the short term, restarting idled oil production capacity would still take a considerable amount of time. The CEO of Kuwait Oil Company said explicitly that a full restoration of production may still require 3 to 4 months. This means that the duration of high oil prices could be far longer than the market’s initial expectations, and the cumulative economic cost will gradually become visible over the coming quarters.

Diverging Safe-Haven Assets: What Role Does Bitcoin Play in a Stagflation Narrative?

Against the backdrop of simultaneous pressure on gold and U.S. debt, Bitcoin’s price behavior has become a variable worth paying close attention to. As of April 3, 2026, Bitcoin on the Gate platform has been trading in a range around 67,000 U.S. dollars. Its 24-hour decline is about 1.8%. Its volatility is clearly lower than gold’s single-month decline in March of more than 11%. Looking at a longer time horizon, Bitcoin ended March up by about 2%, breaking the prior streak of five consecutive months of declines, and it showed greater price resilience than most traditional assets throughout the entire conflict. Market analysis points out that within several weeks, Bitcoin’s sensitivity to both positive and negative news has decreased somewhat, and it is forming a relatively independent trading range. The logic behind this price behavior is worth a deep analysis. Gold’s weakness stems from rising holding costs in a high-interest-rate environment, while Bitcoin’s independent performance benefits partly from its supply rigidity—global inflation expectations driven by the oil-price surge logically reinforce the narrative foundation of Bitcoin as a “digital hard asset.” In addition, some market participants view Bitcoin as an inverse expression of confidence in the fiat currency system. When an energy shock combines with fiscal pressure, this narrative gains a new dimension of support. The divergence between Bitcoin and traditional safe-haven assets is redefining Bitcoin’s asset role in macro risk events.

Two Branch Paths: Market Direction Determined by the End-of-Month FOMC Decision and the Nonfarm Payroll Data

The coming month will be a critical window for determining the direction of asset prices. The U.S. March nonfarm payroll report released on April 4 will be the first major test point. Markets generally expect new jobs in March to be between 50,000 and 65,000, rebounding from the weak February data showing a drop of 92,000, but still far from the strong level typical of a normal expansion cycle. The unemployment rate is expected to stay around 4.4%, while average hourly earnings’ month-over-month growth is expected to be between 0.3% and 0.4%. The subtlety of this set of data is that job growth is weak, but wages remain sticky—this is the “stagflation” signal that the market is most wary of. If the actual data deteriorate further—if job growth is below 50,000 and wage growth exceeds 0.5%—it will directly reinforce the stagflation narrative and put the Federal Reserve in a dilemma: unable to cut rates to boost the economy, yet also having to deal with inflation pressure.

Right after that comes the FOMC meeting at the end of April. Market pricing for the Federal Reserve’s policy path has shifted from “rate cuts” to “on hold,” and even some have priced in the risk of rate hikes. However, some institutions have recently clearly opposed the market’s hawkish stance, pointing out that the sustained inflation and rate-hike risks currently caused by supply shocks are far lower than in the 1970s or in the 2021 to 2022 period. The existence of disagreement means there is still substantial room for major revisions to market expectations—regardless of direction, it will have a significant impact on the crypto market. The direction of the Middle East conflict is the third key variable. Some analyses predict that there is a 25% probability the conflict will end before the end of May, a 45% probability it will be resolved in the autumn of 2026, and a 35% probability it will continue into 2027. If there are signs of easing, oil prices may quickly fall by 10 to 15 U.S. dollars per barrel, easing the Federal Reserve’s hawkish pressure. If the conflict further escalates into a blockade of the Strait of Mandeb, Brent crude oil prices could rise from 150 U.S. dollars to 200 U.S. dollars within a matter of weeks.

Risk Reassessment: Three Major Potential Shocks Underestimated by the Market

Current market pricing may still not fully reflect certain tail risks. First, the cycle of restoring capacity after attacks on energy facilities is being seriously underestimated. If Iran’s and the energy facilities in Saudi Arabia, the United Arab Emirates, and Qatar are damaged due to mutual attacks, even if a ceasefire agreement is reached, restoring production would still take several months. This means the duration of high oil prices could be far longer than market expectations, resulting in more persistent effects on the inflation and interest-rate paths. Second, there is the possibility of nonlinear amplification of supply shortages. Some institutional analysts warn that if the Strait of Mandeb is also blocked, the average Brent crude oil price could reach 130 U.S. dollars per barrel. In a “double bottleneck” scenario where both of the two major shipping routes are obstructed, baseline assumptions for the global energy supply chain would be completely rewritten. Third, the policy response space is narrowing. The head of the International Energy Agency has stated clearly that a further release of oil reserves cannot fundamentally solve the problem; the only way is to reopen the Strait of Hormuz. In a situation where the geopolitical stalemate is difficult to break, the effective options in the policy toolbox are rapidly shrinking. If these three dimensions of risk overlap and resonate, they could trigger volatility more severe than what the market is currently pricing.

Summary

The Strait of Hormuz blockade incident is triggering a deep restructuring of the global asset-pricing logic. Oil prices surging above 116 U.S. dollars, the complete disappearance of bets on Federal Reserve rate cuts in 2026, and gold and U.S. debt facing synchronized pressure—all three strands point to a common conclusion: the traditional “safe-haven assets” framework is being eroded by the dual pressure of “inflation and interest rates.” Within this structural shift, Bitcoin has shown resilience characteristics distinct from gold. Its price behavior is supported by both the supply rigidity narrative and confidence in the fiat currency system, and the divergence from traditional safe-haven assets is forming a new market logic. Over the next month, nonfarm data, the FOMC decision, and the direction of the Middle East situation will jointly determine whether this divergence trend continues or reverses. No matter the direction, a more complex macroeconomic pricing environment is on the way, and the role of crypto assets will continue to face tests and reshaping.

FAQ

Q: Could the Federal Reserve still cut rates in 2026?

Based on current market pricing and statements from Federal Reserve officials, the likelihood of rate cuts in 2026 has fallen significantly. Multiple officials, including the New York Fed president, have clearly stated that they prefer to keep interest rates unchanged, and market bets on rate cuts have essentially disappeared. However, some institutions believe the market’s hawkish stance may be overstated, arguing that the inflation risk caused by supply shocks is far lower than in historically comparable periods. Ultimately, the direction will depend on the evolution of nonfarm employment data and the Middle East situation.

Q: How long will the impact of the Strait of Hormuz blockade on oil prices last?

The duration depends on three variables: how quickly navigation through the strait is restored, the scale of oil-reserve releases, and how long the fighting lasts. Even if the conflict ends in the short term, restarting idled oil production capacity may still take 3 to 4 months, and oil prices will not quickly fall back to the pre-conflict level of about 65 U.S. dollars per barrel. Multiple institutions predict that Brent crude oil prices will remain high in April, with an average of about 125 U.S. dollars per barrel, and could fall to around 80 U.S. dollars by year-end.

Q: What are the reasons Bitcoin has shown stress-resilient resilience during this crisis?

Bitcoin ended March up by about 2%, ending a streak of five consecutive months of declines, and it performed better than gold over the same period’s decline of more than 11%. Behind this resilience are multiple factors: Bitcoin’s supply rigidity provides narrative support when inflation expectations heat up; Bitcoin’s sensitivity to both positive and negative news has decreased over the past several weeks, forming a relatively independent trading range; and in addition, some market participants view Bitcoin as a reverse expression of confidence in the fiat currency system. But it should be noted that Bitcoin still faces macro pressure. In March, U.S. spot Bitcoin ETFs saw about 110 million U.S. dollars in net outflows, suggesting that institutional allocations remain sensitive to macroeconomic changes.

Q: Why is the upcoming nonfarm data so critical?

The March nonfarm data (expected to be released on April 4) will be an important signal for testing whether the U.S. economy is entering a “stagflation” regime. The market expects new jobs to be between 50,000 and 65,000, far below the level typical of a normal expansion cycle. If job growth is below 50,000 and wage growth exceeds 0.5%, it will reinforce the stagflation narrative and prevent the Federal Reserve from cutting rates to boost the economy. Conversely, if the data indicate a moderate cooling of the economy, it could leave room for more accommodative policies in the future.

Q: What decisions might the end-of-April FOMC meeting make?

Markets broadly expect the Federal Reserve to keep interest rates unchanged at the end-of-April FOMC meeting. The Fed chair has said monetary policy is “in a favorable position,” and it can evaluate the impact of the Iran war on the economy. The key is how the Federal Reserve describes the outlook for inflation and economic growth—whether it acknowledges that the oil-price shock could lead to more persistent inflation pressure, or whether it tends to view the current shock as temporary. This statement will directly affect how the market prices future interest-rate paths.