On Monday, Bitcoin (BTC) dropped below $63,000 as global markets experienced a broad risk-off shift amid the rising military tension between Iran and Israel. The world's largest cryptocurrency touched $62,900 in Asian trading hours following a short rally to $63,776 on Sunday.
The drop follows rising fears that an escalation in the Middle East may strain energy supplies, cause an increase in fuel costs, and squeeze global finances.
Crude oil prices rallied sharply following news of renewed airstrikes in West Asia which dashed hopes of a lasting ceasefire. Brent crude futures advanced 4.82% to $97.58 a barrel. US West Texas Intermediate (WTI) rose 4.52% to $94.63 a barrel, which further weighed on the inflation worries.
US President Donald Trump said he requested Israeli Prime Minister Benjamin Netanyahu to show restraint and tell him ‘not to retaliate’.
"I am going to call Bibi right now and tell him not to retaliate," he told Axios in a telephonic interview. "Israel had its strike and Iran had its strike. We don't need another one."
The geopolitical fallout affected Asian stocks. South Korea's KOSPI index fell by around 8%, dropping to the 7,400 level as Samsung Electronics and SK Hynix both plummeted by around 8-9% at the open.
As a result, at around 9:03 am, the KOSPI’s decline exceeded 8%, triggering a circuit breaker that stopped the trading for 20 minutes.
Before the emergency mechanism kicked in, the Korea Exchange said the index lost 685.85 points from its previous close.
Other major companies, including Samsung SDI (-9%), LG Electronics (-12.7%), and Hyundai Motor (-10%), also plummeted by nearly 10% as they start the week.
The Nikkei index in Japan fell by over 3%, and investors around the region headed for safer investments.
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Bitcoin was already under pressure before the latest geopolitical developments. Over the last week, the cryptocurrency has declined by approximately 14%, fueled by spot Bitcoin ETF outflows, a rise in Treasury yields, institutional profit-taking, and general risk aversion.
Higher oil prices are also boosting inflation expectations and, in turn, keeping US interest rates high for a longer period. A rise in Treasury yields tends to strengthen the dollar and weaken the demand for speculative investments like cryptocurrencies.