Market tension: Bitcoin drop as Iranian oil relief boosts oil volatility

Global markets are struggling to price the Iran conflict as a sharp Bitcoin drop collides with a fast-evolving energy supply crisis in the Strait of Hormuz.

Waiver unlocks Iranian oil amid escalating conflict

On March 20, the U.S. Treasury’s Office of Foreign Assets Control issued General License U, a 30-day sanctions waiver running until April 19 that allows the sale of Iranian oil stranded at sea. The measure covers all transactions needed for the sale, delivery and offloading of roughly 140 million barrels of Iranian crude, immediately boosting potential supply.

Treasury Secretary Scott Bessent framed the move as a tactical step, arguing that those barrels were already being “hoarded by China on the cheap” and could now be used “against Tehran to keep the price down,” as reported by CNBC. With Brent crude up over 44% since the conflict began and trading at $113 per barrel, pressure on policymakers has intensified.

However, the waiver lands in a highly constrained physical market. The Strait of Hormuz has seen only 90 ships pass through since March 1, underscoring how vulnerable the global energy system has become to further disruptions in this key chokepoint.

Backlash over the Iran oil waiver and political contradictions

The political backlash in Washington was immediate. The Foundation for Defense of Democracies called the decision “funding the enemy,” accusing the administration of loosening sanctions during an active conflict without adequate safeguards. Moreover, NBC News stressed that the waiver hands Iran an economic boost even as strikes target its military infrastructure.

That said, the core contradiction goes beyond partisan rhetoric. The same U.S. administration that is authorizing strikes on Iranian targets is also ensuring that Iranian oil revenue continues to flow. Officials appear to have concluded that the alternative – an uncontrolled energy price spiral feeding into already sticky domestic inflation – is an unacceptable economic and political risk.

Trump’s 48-hour ultimatum and threat to power plants

Just as markets began to factor in some relief from supply pressures, escalation returned on March 22. President Donald Trump issued a 48-hour ultimatum on Truth Social, warning that if Iran did not “fully open” the Strait of Hormuz, the U.S. would “hit and obliterate their various power plants, starting with the biggest one first.”

Axios described the statement as a “dramatic reversal,” noting that only a day earlier Trump had hinted at winding down operations in Iran. However, the new posture pushed the conflict further up the escalation ladder and reignited fears of a prolonged energy shock.

Iran quickly responded that any strike on its power plants would trigger retaliatory attacks on U.S. energy infrastructure in the region. Moreover, Tehran warned that the Strait of Hormuz would be completely closed until any damaged facilities were rebuilt, raising the specter of an indefinite blockade.

Energy markets react to the ultimatum

The timing of the two decisions is particularly stark. Trump’s ultimatum came less than 48 hours after the sanctions waiver designed to ease the energy crunch. Instead of clarity, markets were left to digest a sharp duality: more barrels potentially entering circulation while the critical maritime passage faces fresh closure threats.

That said, traders wasted no time responding. Brent remained around $113 per barrel, while WTI climbed back above $100 as the ultimatum hit the tape. By seeking to solve an energy shock partly through coercive pressure, the administration risks provoking the very outcome it is trying to prevent: a deeper supply disruption.

Bitcoin at $68K as the war outperformance narrative falters

Since the conflict began on February 28, Bitcoin has outperformed major equity benchmarks and traditional havens like Gold. Over the first three weeks of the war, the asset rallied more than 15% from about $66K to a peak near $76K on March 17. However, the recent correction has challenged that momentum.

Over the past week, Bitcoin has dropped more than 5%, sliding from its $76K high to around $68K. This bitcoin drop marks the largest pullback since the conflict started and represents the first significant test of its war outperformance narrative against stocks such as the S&P 500 and major Asian indices.

Currently, there are two competing explanations. One is that this is a routine post-FOMC pullback; Bitcoin has fallen after seven of the last eight Fed meetings, regardless of macro conditions. The other is more troubling: the conflict may have crossed a severity threshold that even crypto markets cannot ignore, with Trump’s Saturday-night ultimatum acting as the catalyst for repricing.

Key levels for BTC as volatility builds

For now, Bitcoin is holding above the $67K region, which served as the pre-breakout level at the start of the recent advance. Moreover, this zone has become the critical line for traders watching whether the war-related outperformance theme can survive a deeper shock.

If $67K fails, the next notable support sits around $65K. That said, with the 48-hour deadline expiring around 11:45 PM UTC, positioning remains fragile. The market is effectively betting on a binary outcome: a walk-back from escalation or a direct hit on key Iranian power assets with far-reaching implications for risk sentiment.

Two scenarios for the deadline and global markets

The waiver and the ultimatum have created two sharply different scenario paths. In Scenario A, Trump backs down or extends the deadline. The waiver then operates as intended, enabling about 140 million barrels of Iranian crude to reach buyers, while the Strait of Hormuz continues operating in a constrained but functional state.

In that case, oil prices could drift back toward the $90–$100 range, easing the immediate energy shock. Moreover, Bitcoin would likely stabilize and grind back closer to the $70K area, while odds of a potential rate cut in the second half of the year improve. The war would remain a source of uncertainty, but within a more manageable band for investors.

Escalation scenario: deeper energy shock and risk-off move

Scenario B is far more disruptive. If the U.S. follows through with strikes on major Iranian power plants, a full closure of the Strait becomes plausible and the energy supply crisis enters uncharted territory. Such a move would likely send oil accelerating toward the $120 mark and could trigger a broad unwind in risk assets.

The first signal will come from crude. Watch oil prices in the hour after the deadline: a spike above $120 would indicate markets are pricing escalation, while a move back below $110 would suggest de-escalation. For Bitcoin, the reaction could arrive even faster. Its 24/7 trading means it will likely register the outcome before traditional exchanges open, whether as a safe-haven bid or as part of a wider risk-off liquidation.

In summary, a fragile energy market, contradictory U.S. policy toward Iran and a sliding Bitcoin price have converged into a single binary moment. How the deadline is resolved will set the tone not only for oil and cryptocurrencies, but for the broader global risk landscape in the weeks ahead.