Written by: Cointelegraph
Compiled by: AiddiaoJP, Foresight News
Bitcoin has been one of the strongest performing assets during the war between the US and Iran. However, due to the "out-of-control" state of the bond market, Bitcoin's upward momentum is showing signs of weakening.
Key points:
- If the war between the US and Iran continues, the yield on benchmark US Treasury bonds may rise by 200 basis points.
- Historical experience suggests that oil-related conflicts tend to drive up inflation and suppress risk appetite, suggesting that the price of Bitcoin may fall below $50,000 in 2026.
Oil supply shocks may push US Treasury yields above 5%.
Since the US and Israel launched their attack on Iran on February 28, the benchmark 10-year US Treasury yield has climbed to about 4.42%, a nine-month high.
Monthly performance of yields on 2-year, 10-year, and 30-year US Treasury bonds. Source: TradingView
Among them, the yield on 30-year Treasury bonds rose to about 4.97%, and the yield on 2-year Treasury bonds also rose to the range of 3.95% to 3.98%.
The war has caused oil prices to surge, exacerbating market concerns about rising inflation and pushing up government bond yields. Against this backdrop, the market generally expects no interest rate cuts in 2026.
US President Donald Trump's announcement of a five-day pause in operations temporarily eased immediate market concerns about attacks on Iranian energy facilities. However, as Iran denies engaging in any negotiations and cross-border attacks continued as of Tuesday, the conflict remains uncontrolled.
Source: X
Market observers have expressed concern, believing that there is a risk of further upward movement in US Treasury yields. Technical analysts further point out that if the 10-year Treasury yield breaks through the current symmetrical triangle pattern, it could rise by 200 basis points to 6.4%.
Monthly chart of the US 10-year Treasury yield. Source: TradingView
Rising yields will reduce the opportunity cost of holding risky assets such as stocks and Bitcoin. If Bitcoin continues to exhibit risky asset characteristics, a break above 5% in the 10-year Treasury yield could trigger selling pressure in the Bitcoin market.
Historical cases of oil-related shocks
Historically, short-term conflicts related to oil typically trigger sharp but brief fluctuations in government bond yields and the stock market, while long-term supply shocks can push yields up continuously and exert sustained downward pressure on the stock market.
During the Yom Kippur War in 1973 and the Arab oil embargo, government bond yields initially rose slightly, but then climbed significantly as inflation intensified, with the S&P 500 falling by about 41% to 48% during the "stagflation" phase.
Chart showing the annual trend of the US 10-year Treasury yield and the S&P 500 index. Source: TradingView
During the Iranian Revolution in 1979, the bond market reacted more strongly, with the yield on 10-year government bonds rising by about 150 to 200 basis points in the following year, while the stock market correction was relatively mild.
During the Gulf War of 1990–1991, the yield on 10-year Treasury bonds rose by about 50 to 70 basis points, and the S&P 500 fell by about 16% to 20%, before rebounding after the conflict was brought under control.
Following the outbreak of the Russia-Ukraine conflict in 2022, there was a situation where government bond yields rose and the S&P 500 index fell by 5% to 10% in the short term.
The current conflict between the United States and Israel with Iran appears to be in the early stages of the aforementioned historical pattern. If the conflict continues to escalate and oil prices remain high, Treasury yields may rise further, and risk assets may face a new round of downward pressure.
Bitcoin and the S&P 500 index remain highly correlated. Therefore, unless the conflict situation deteriorates rapidly, Bitcoin prices are likely to face further downward pressure.
How low might the price of Bitcoin go?
From a technical analysis perspective, if the price of Bitcoin breaks below the current bearish flag pattern, it may fall further to $50,000 or even lower in the coming months.
Bitcoin/USD 3-day price chart. Source: TradingView
The above technical expectations are largely consistent with the trading data from the prediction market. Currently, traders estimate a 70% probability that Bitcoin will fall below $55,000 in 2026 and a 46% probability that it will fall below $45,000.
BitMEX co-founder Arthur Hayes stated that if the US-Iran war continues to drag on, it may force the Federal Reserve to adopt an easing monetary policy, which would be a positive factor for Bitcoin.
He pointed out, "The longer the conflict lasts, the greater the likelihood that the Federal Reserve will print money to support the US war machine." He further added:
"I will buy Bitcoin when central banks start printing money."
