Geopolitical Conflict Sparks Market Volatility and Bitcoin's Uncertain Future

The situation in my crypto wallet aside, let's analyze the current environment. Immediately after Israel conducted precision strikes on Iran's nuclear facilities, the global market appeared to swiftly enter a risk-off phase. There was a sharp rise in oil prices and a significant decline across US futures and the entire crypto sector. This response resembles the initial reactions seen during past conflicts such as the Iraq invasion in 2003 and the Russia-Ukraine war in 2022. In the case of Iraq, markets halted their decline and began recovering within 2-3 weeks post-invasion. During the Ukraine conflict, initial asset price volatility subsided in a few months, with raw materials, energy, and defense-related assets turning bullish again. Bitcoin also regained its safe-haven narrative and recovered. The key factor currently seems to hinge on the extent of the conflict's spread. Iran has already threatened retaliation. If groups like Hezbollah, Houthi rebels, or Iraqi militias acting in support of Iran become involved, Israel might escalate its response, potentially leading to a full-scale war. The worst-case scenario involves oil prices exceeding $100 and long-term pressures on interest rate policies, global inflation, and risk assets. Conversely, if the US manages to contain the conflict locally, risking a limited regional war, markets could quickly absorb the shock and rebound. Right now, it’s prudent to focus on monitoring military signals rather than making all-in directional bets. An uncertain aspect is Bitcoin’s inherent classification as a 'non-state asset,' which might allow it to reassert its narrative post-crisis. It remains unclear whether it will crash along with tech stocks as a risk asset or rally alongside gold as a non-state asset.