Cryptocurrency and equities regain footing following midweek decline, while the bond market remains skeptical.

Risk assets recover from oil-driven selloff as rising yields pressure Fed rate-cut bets.

Bonds diverge from the stability seen in bitcoin and stocks. (sergeitokmakov/Pixabay/Modified by CoinDesk)

What to know:

• Bitcoin and global equities have recovered from a sell-off earlier in the week prompted by the U.S.-Israel-Iran conflict.
• In contrast, bond yields continue to rise as traders reevaluate inflation expectations and reduce forecasts for Fed rate cuts.
• Robust U.S. economic indicators and the potential for a sustained energy-induced inflation surge warrant caution.

Bitcoin BTC$70,329.00 and global stock markets have shown signs of stabilization following an early-week sell-off and an increase in oil prices stemming from military tensions involving the U.S., Israel, and Iran. However, bond markets are exhibiting caution as increasing yields indicate renewed inflation worries and decreasing expectations for Fed rate cuts.

BTC, the premier cryptocurrency by market capitalization, traded above $70,000 on Friday, marking an increase of nearly 10% for the week. Prices briefly surged to almost $74,000 on Wednesday after falling to approximately $65,000 over the weekend due to geopolitical uncertainties affecting markets.

This recovery has also been reflected in equity futures. Contracts linked to the S&P 500 dipped to a multi-week low of 6,718 points on Tuesday before bouncing back to around 6,840 as of the current report.

The initial risk-off sentiment was triggered when oil prices rose sharply following reports that Iran had obstructed oil tankers in the Strait of Hormuz, a vital passage for global crude supplies. Markets regained stability after the U.S. swiftly intervened to alleviate concerns, offering naval escorts and political risk guarantees for oil and gas tankers navigating through the strait.

Nevertheless, the bond market remains apprehensive.

The yield on the 10-year U.S. Treasury note has increased for four consecutive days, rising from 3.93% to 4.15%. Bond prices fluctuate inversely to yields. Additionally, the two-year yield, which is more sensitive to interest rate forecasts, has risen from 3.37% to nearly 3.60%.

The upward movement in yields indicates that traders are reevaluating the future of monetary policy as the energy-price surge driven by conflict threatens to revive inflationary pressures.

As per CME Fed funds futures, investors currently anticipate less than a 50% likelihood of two 25-basis-point Fed rate cuts this year, a decrease from nearly 80% prior to the onset of the conflict.

"The rates market is exposing the tension in this rally," Bryan Tan, a trader at prominent digital asset market maker Wintermute, remarked in an email, referencing the rise in yields.

"The clash between a resilient economy (ISM Services at 56.1, ADP at +63K versus +50K anticipated) and an inflationary energy shock is historically the type of situation that keeps the Fed stalled for an extended period. The Warsh nomination reaching the Senate this week introduces further hawkish uncertainty," Tan added.

Some analysts observe that the inflationary effects of oil shocks generally unfold gradually across the global economy, indicating yields could remain elevated in the forthcoming weeks and possibly limit gains in risk assets like stocks and cryptocurrencies.

"Following significant geopolitical shocks, oil prices typically increase gradually over weeks. The average pattern reveals oil often climbing 20–30% within approximately 60 days post-shock," analyst Jack Prandelli noted on X. "Markets frequently undervalue the initial phase of supply risk. The substantial movement usually occurs once physical disruptions start to appear in flows and inventories."

Recent strong economic data from the U.S. has also played a role in the rise of yields and the reduction of rate-cut expectations. Data released on Tuesday indicated that economic activity in the U.S. services sector continued to grow in February, with the ISM index increasing to 56.1. The ADP private payrolls report recorded 63,000 job additions in February, the highest figure since July 2025.

Focus now shifts to Friday’s nonfarm payrolls report and wage growth statistics. A stronger-than-expected result could further diminish expectations for Fed rate cuts and introduce new volatility into financial markets.