New negotiations between the US and Iran have once again raised the possibility of reopening the Strait of Hormuz. The Strait of Hormuz, as one of the key energy transit routes in the world, plays a crucial role in oil supply, and any disruption in the passage of ships could increase concerns about oil supply.
Impact on Oil Prices
The return of normal traffic in the Strait of Hormuz could reduce part of the oil supply risk. On September 22, the market reacted to the news of the potential reopening of the strait, and WTI oil prices fell by more than 2.5%, reaching around $89. The decrease in energy prices could alleviate inflationary pressures and impact financial markets.
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Impact on Cryptocurrencies
Changes in oil prices and inflation expectations could impact the cryptocurrency market, especially Bitcoin and Ethereum. Bitcoin, after reaching $87,392 at the beginning of the week, has returned to the $84,000 range. The range of $86,700 to $87,400 is considered the most significant resistance for Bitcoin.
On the other hand, Ethereum has also faced a correction after reaching around $2,789 and is now in the $2,600 range. The most important short-term level for Ethereum is $2,700. Regaining this level could reopen the price path towards the recent peak of $2,789.
Continued inflows into Bitcoin and Ethereum spot ETFs have also been one of the supportive factors for the market. US Bitcoin spot ETFs recorded about $2.65 billion in net inflows over the five trading sessions ending September 23.
Challenges Ahead
Iran's new proposal has not yet led to a final agreement with the US. Its implementation depends on accepting conditions including a halt to hostilities, lifting some sanctions, and releasing frozen assets. If negotiations do not yield results and disruptions in the Strait of Hormuz continue, the pressure from high oil prices and high Treasury yields could remain one of the main obstacles to the growth of Bitcoin and Ethereum.
Conversely, a sustainable reopening of the Strait of Hormuz and a decrease in oil prices could alleviate some of the existing inflationary and macroeconomic pressures in the market; however, this alone does not guarantee growth for Bitcoin and Ethereum.
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