The US launched military strikes on Iranian targets over a three-day stretch from May 26 to 28, and Iran hit back. Oil prices responded the way oil prices always do when two major powers start exchanging fire near the world’s most important shipping lane: they went up.

Brent crude climbed roughly 2-4%, pushing prices into the $96 to $102 per barrel range. For crypto investors hoping geopolitical chaos might boost Bitcoin’s “digital gold” narrative, the opposite happened. Bitcoin dropped below $73,000, and the resulting cascade of margin calls triggered over $1 billion in liquidations across the crypto market.

The Strait of Hormuz problem

The Strait of Hormuz, the narrow waterway separating Iran from the Arabian Peninsula, handles roughly 20% of global oil flows. When two countries start shooting near that bridge, energy traders get nervous fast.

The price spike is especially notable because oil had been trending the other direction not long before. Optimism around ceasefire negotiations had previously driven oil prices down by more than 7% in a single day. That goodwill evaporated the moment strikes resumed.

Crypto caught in the crossfire

Bitcoin’s slide below $73,000 marked a six-week low for the largest cryptocurrency. Ether, XRP, and Dogecoin all faced selling pressure as the broader risk-off mood dampened appetite for growth-sensitive tokens.

The $1 billion-plus in liquidations tells the real story. Leveraged traders, many of whom had been betting on continued upside, got wiped out as prices moved against them. That forced selling then pushed prices even lower.

Platforms like CoinDesk and CryptoBriefing noted that surges in oil prices have historically created macroeconomic headwinds for digital currencies. Higher energy costs feed into consumer prices, which feed into interest rate expectations, which make holding zero-yield speculative assets less attractive.

Iran has reportedly explored using Bitcoin for maritime insurance and transit fees related to oil tanker passage through the Strait of Hormuz.

What this means for investors

Ceasefire extension talks, including discussions around a potential 60-day pause in hostilities, remain the single biggest variable for both oil and crypto prices. Previous rounds of positive diplomatic signals led to favorable momentum for Bitcoin and other risk assets. With Brent crude hovering near $100 per barrel, that keeps the macro environment hostile for assets like crypto that thrive on loose monetary conditions and risk appetite.

If Iran’s experiment with Bitcoin for oil-related transactions gains traction, it introduces a new source of demand driven by necessity rather than speculation, which carries different implications for long-term price dynamics and regulatory scrutiny.