Bitcoin may encounter additional selling pressure if oil remains at $70 following its increase and the Federal Reserve adopts a more cautious stance.

Oil is not expected to dominate the narrative in 2026. The overarching theme driving “cuts soon, liquidity soon” trades hinges on the persistence of disinflation.

Nonetheless, Brent rose 4.35% to $70.35 on February 18, while WTI increased 4.59% to $65.19 following reports that heightened the risk of a US-Iran conflict and that Russia-Ukraine discussions concluded without any progress.

This is not merely an “oil traders” phenomenon. It is a rates phenomenon, and consequently, a Bitcoin phenomenon.

Bitcoin does not trade in barrels. It reflects the trajectory of financial conditions. When oil prices fluctuate due to supply-disruption concerns, it impacts the very pressure points that maintain elevated rates for an extended period.

Risk premium, not demand

The increase was not indicative of “growth accelerating.” It was geopolitics adding a premium to the curve.

Buying activity intensified late in the session after Israel heightened alert levels in response to signs of potential US action against Iran. Iran’s Revolutionary Guard conducted exercises that temporarily restricted parts of the Strait of Hormuz.

Peace negotiations between Russia and Ukraine in Geneva did not yield any advancements.

The US Energy Information Administration projects that oil transit through the Strait averaged around 20 million barrels per day in 2024, accounting for approximately 20% of global petroleum liquids consumption.

Traders do not require a prolonged closure to adjust risk; a plausible disruption at such a significant bottleneck suffices.

Fluctuations in oil prices do not inherently signal movements in Bitcoin prices. It creates a divergence.

On one hand, there is the narrative that rising oil prices elevate inflation expectations, leading to increased yields, a sell-off in risk assets, and an initial decline in Bitcoin. Conversely, another narrative suggests that war-risk premiums drive bids for a hedge basket that includes oil, gold, and occasionally Bitcoin.

February 18 demonstrated which narrative prevailed. Gold surged approximately 2%, the dollar index increased, Treasury yields rose, and Bitcoin fell 2.4% to around $66,102.37.

This combination suggests “tightening conditions,” rather than “Bitcoin as a hedge.”

On February 18, oil and gold experienced gains while Bitcoin declined by 2.4%, with rising yields and dollar strength indicating tightening financial conditions.

Oil disrupts disinflation, the Fed grows less patient

Oil shocks interrupt the disinflation process as energy impacts transportation and input costs rapidly.

Research from the San Francisco Fed in December 2025 indicates that the two-year Treasury yield has become increasingly responsive to oil supply surprises in recent years compared to the pre-2021 period. This is significant for Bitcoin, as the two-year yield serves as the market’s shorthand for “how many cuts, how soon.”

When oil prices rise due to supply-risk factors, markets question, “does this re-establish inflation?”

The “cut season” trade is precarious. If energy-related headlines keep Brent prices elevated, markets will adjust expectations toward fewer cuts, resulting in a stronger dollar, higher real yields, and diminished risk appetite.

Bitcoin often experiences sharper declines than equities when leverage is concentrated and macro conditions tighten.

Three scenarios ahead

Three potential scenarios exist for Bitcoin.

Brent is trading $12 above the EIA’s $58 baseline forecast, with the current $70 price reflecting a geopolitical risk premium stemming from Iran-US Hormuz tensions.

The first scenario occurs if the risk premium diminishes. Diplomatic efforts ease tensions, the risk of disruption in Hormuz decreases, and Brent drifts toward the mid-$60s.

Citi has suggested that de-escalation could bring Brent down to the $60-62 range by mid-2026. This would reopen the disinflation narrative and revitalize the cuts-soon trade. Bitcoin would benefit as financial conditions improve.
This represents the most optimistic scenario.

The second scenario arises if the risk premium persists. Brent remains in the $65-$70 range as geopolitical tensions stay unresolved.

Central banks remain cautious about aggressive cuts. Bitcoin may experience gains from crypto-specific flows but will contend with macro headwinds. The “higher for longer” rate environment limits potential upside.

The third scenario involves an escalation of tail risk. The Eurasia Group estimates a 65% likelihood of US strikes against Iran by the end of April.

Disruption in Hormuz could lead to a spike in prices. Bitcoin would face significant tension: hedge fund demand pulling in one direction, while rate shock pressure pulls in the opposite direction.

If oil prices reach $80 or $90, inflation expectations would rise, yields would soar, and financial conditions would tighten sharply.

Scenario	Oil path (Brent range)	Macro transmission (breakevens / 2Y / DXY)	Policy implication (cuts)	BTC behavior (risk vs hedge)	What to watch next (1–2 indicators)
Risk premium fades	Mid-$60s drift; Citi $60–62	Breakevens cool; 2Y eases; DXY softens as conditions loosen	Cuts back on the table sooner / more cuts priced	BTC behaves more risk-on (liquidity-sensitive); rallies as “cuts soon” returns	Brent breaks below ~$65 and stays there; 2Y rolls over (cuts re-priced in)
Risk premium sticks	$65–70 range	Breakevens sticky; 2Y stays elevated; DXY firm	Cuts delayed / fewer cuts; “higher for longer” vibe	BTC can rally on crypto flows but macro caps upside; trades like risk most days	Brent holds >$70 on closes; DXY trends up (tightening)
Escalation tail risk	$80–90 spike	Breakevens jump; 2Y pops; DXY spikes (risk-off tightening)	Cuts get pushed out sharply; risk of renewed hawkishness	BTC faces identity crisis: brief “hedge” bid possible, but rate shock usually makes it trade like risk	Hormuz headlines + backwardation widens; breakevens surge alongside oil

Implications for Bitcoin traders

The EIA anticipates Brent averaging $58 in 2026, driven by supply outpacing demand.

Current prices incorporate a geopolitical premium that analysts estimate to be between $4-$7 per barrel. In the absence of conflict risk, crude would trade in the high $50s, considering the International Energy Agency’s projected surplus of 3.7 million barrels per day.

For the US two-year yield, an upward trend indicates that cuts have been postponed. If yields rise as oil remains high, the market is pricing in a tighter policy for an extended period.

For breakevens, the critical factor is whether inflation expectations increase alongside oil prices. This serves as a stress test for the disinflation narrative.

Moreover, a stronger dollar signifies tighter conditions. On February 18, the DXY rose in tandem with oil and gold, representing a classic “macro tightening” scenario.

February 18 appeared risk-oriented, with Bitcoin declining while gold increased. If Bitcoin rises alongside gold while yields stabilize, the hedge narrative may return.

Additionally, developments in DeFi, halving cycles, and ETF flows are significant.

However, on days like February 18, Bitcoin is grappling with the same question as other assets: does this oil movement compel the Fed to maintain a tight stance?

The uncomfortable reality is that Bitcoin’s macro identity is still evolving.

It aspires to be digital gold during geopolitical tensions. However, it behaves like leveraged tech when rates dictate the narrative.

The asset cannot fulfill both roles simultaneously, and oil shocks compel the market to make a choice. Currently, when oil prices rise due to supply risks and elevate inflation concerns, Bitcoin declines alongside risk assets rather than increasing with gold.

The upcoming two weeks are crucial.

Iran is returning to Geneva with a new proposal. Russia and Ukraine continue their discussions. India’s oil purchasing decisions will be clarified.

Each of these factors influences the Brent curve, which in turn affects inflation expectations, subsequently impacting the two-year yield, which determines whether the “cuts soon” narrative remains viable.

Bitcoin’s trajectory follows this chain. Oil is not meant to be the focal point, but sometimes the narrative you overlook is the one that influences the market.

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