Oil price surge puts renewed pressure on stock markets and Bitcoin

Bitcoin and the markets have just come through a turbulent week of trading. The world’s largest cryptocurrency came under mounting pressure over the past week amid a combination of macroeconomic factors and geopolitical uncertainty.

Rising oil prices (Saudi Arabia shut a key pipeline following attacks by the Houthis in Yemen), persistent inflation pressure in the United States and growing expectations that the US Federal Reserve will raise interest rates again left investors worldwide less willing to take on risk. US markets have been trading sideways for some time, while Bitcoin is struggling to clear the $80.000 level.

$100

Developments in the Middle East in particular played a major role in shaping market sentiment again in recent days. Tensions in the region pushed the price of oil to just above the psychologically important threshold of $100 a barrel. Investors fear that further escalation could disrupt global energy supplies (just as the colder months begin), reigniting inflation at a time when central banks are only just trying to bring price rises under control.

Against this backdrop, Bitcoin is losing ground. The world’s largest cryptocurrency fell to around $77.100 last week. Although Bitcoin briefly came close to the key $80.000 level, enthusiasm proved insufficient to deliver a sustained breakout. Higher yields on US government bonds made safe-haven investments attractive once more, drawing capital away from riskier assets such as technology stocks and cryptocurrencies.

The weakness in the crypto market was not isolated. Stock markets also struggled. Higher oil prices are fuelling fears that inflation will prove more stubborn than hoped, which could force central banks to keep interest rates high for longer. Fresh US inflation data reinforced those concerns and heightened expectations that the Fed could announce another rate hike at its 16 September policy meeting.