Impact of Geopolitical Escalation in the Middle East on the Crypto Assets Market

The baseline reaction of financial markets in such situations is well known – investors begin to price in the risk of disruptions in raw material supplies, primarily oil, and thus the risk of accelerated inflation, increased global volatility, and tighter financial conditions. Reuters specifically emphasizes that the threat of disruptions in the Strait of Hormuz alone increases the likelihood of a spike in oil prices, and analysts surveyed by the agency allow for oil to move into the three-digit zone if the conflict escalates (Source: Reuters. Market analysts react to US-Israel strikes on Iran. 01.03.2026). In this regard, an increase in oil prices should be expected, and as a consequence, additional demand for US dollars. This is due to the fact that almost all international transactions related to oil, as well as international settlements, are conducted in US dollars, which increases global demand for this currency.

Against this backdrop, the status of Bitcoin is of particular interest. For a long time, Bitcoin has been trying to be integrated into the narrative of "digital gold," that is, an asset that should benefit from distrust in individual governments, as well as in cases of military conflicts and high inflationary risks. The short-term market reaction to the current episode in the Middle East shows a more complex picture. According to data from the media platform Decrypt, specializing in the Web3 industry, the crypto asset market experienced around $490 million in liquidations over 24 hours, mainly in long positions in BTC, and according to Reuters data from 28.02.2026, Bitcoin fell by about 2% on the day the conflict began.

However, analyzing the historical reactions of Bitcoin's price in the long term on Figure 1, one can draw different conclusions. Although on the day of the event Bitcoin declined by an average of 2.85%, this reaction cannot be characterized as critical, even given its obvious sensitivity to geopolitical shock. In half of the observations, the decline was offset by the end of the day:

1. On June 13, 2025, the closing price was $106 thousand at an opening level of $105.5 thousand; a similar dynamic was observed on February 28, 2026, when the closing price was near $67 thousand with an opening around $66 thousand,
2. On April 13, 2024, Bitcoin's recovery occurred the next trading day, but it took two weeks to fully return to initial levels,
3. On January 11, 2024, the return to initial levels took 29 days. It is also noteworthy that in two out of three completed episodes, after passing the acute phase of stress, Bitcoin subsequently updated historical highs. However, such a trajectory does not make it equivalent to gold as a classic safe-haven instrument. Unlike traditional "safe haven" assets, Bitcoin in conditions of heightened tension demonstrates predominantly high-volatility and speculative behavior. Accordingly, it is more correctly interpreted as a risky asset that may possess certain protective properties only over a longer investment horizon.

Fig. 1. BTC/USD price chart from the beginning of 2024 (gray area — geopolitical events in the Middle East)

Author: Doctor of Economic Sciences, Professor of the Department of World Economy and World Finance at the Financial University under the Government of the Russian Federation Kashbraziev Rinas Vasimovich