Bitcoin dropped below $65,000 on July 23 as crude oil surged above $100 a barrel following escalating attacks on tankers in the Red Sea, triggering a broad retreat across risk assets and pushing the 10-year Treasury yield to 4.7%, its highest level since January 2025.
Brent crude settled at $100.69, marking the first close above $100 since May and a 7% single-day gain. The oil rally reflected supply concerns stemming from Red Sea shipping disruptions and U.S. military operations in the region. U.S. President Donald Trump threatened Iran and the Houthis with military retaliation, saying damages to ships and cargo could be covered with Iranian funds controlled by the United States. The U.S. completed its 13th consecutive night of strikes against Iran with little indication either side was preparing for near-term negotiations.
The equity market declined in tandem. The S&P 500 fell 1.2% and the Nasdaq Composite lost 2.2%. U.S.-listed spot Bitcoin ETFs posted $225.2 million in net outflows, snapping a seven-session inflow run that had brought in $1 billion. Bitcoin ETFs remained in positive territory for the week at $274 million through Thursday.
Macro Headwinds Intensify
Higher energy costs risk keeping inflation elevated through transportation, manufacturing, and consumer prices, limiting the Federal Reserve’s room to ease policy. Treasury markets have begun reflecting this shift as investors demand higher yields to hold longer-dated government debt. Traders increased bets on another Fed rate move following the oil surge, with CME FedWatch placing the probability of a quarter-point rate increase at the July 28-29 Fed meeting near 40%.
André Dragosch, Head of Research for Europe at Bitwise, warned that a sustained oil rise could push the 10-year Treasury yield to 5%. JPMorgan analysts estimated that three months of constrained oil supply could add $7 to $8 per barrel monthly, potentially driving the Brent benchmark to a monthly average of $114.
Bitcoin Demand Shifts
Spot Bitcoin demand has weakened since June, while futures demand remains positive but well below levels during Bitcoin’s rebound three months earlier. Bitcoin’s recovery is becoming more reliant on derivatives demand at a time when tighter financial conditions could make leveraged positions more vulnerable to reversal, according to analysis in the source material.
Energy markets contend with sharply reduced traffic through the Strait of Hormuz. Renewed Houthi attacks would add pressure around Bab el-Mandeb, the narrow passage connecting the Red Sea with the Gulf of Aden.
Brent crude was trading at $96.70 in European trading as of press time, down from the previous session’s close but still elevated relative to pre-attack levels.
