The week was once again dominated by developments in the Gulf. Markets initially rebounded strongly, fueled by hopes of a quick resolution to the conflict following Trump’s announcement of a televised address. These hopes quickly dissipated, causing another rise in oil prices and increased pressure on bond markets. Equity investors continue to bet on a swift resolution, but Iran has shown little interest in ending the conflict as the prolongation benefits from transit revenues in the Strait of Hormuz and supported oil prices. Gulf monarchies are beginning to discuss alternative pipeline routes, but these projects are costly and will take several years.
Fears of inflation complicate monetary policy as foreign central banks have reduced their sales of US Treasury bonds, exacerbating tensions in bond markets. The ISM Manufacturing Index reached its highest level in four years, mainly attributed to the “prices paid” component indicating pressure on production costs rather than a true demand dynamic. With a potential inflation shock looming, central banks are in a delicate position: lowering rates would be risky, but rate hikes seem unlikely in a slowing consumption context. Employment data, expected soon, will be closely monitored after a particularly disappointing report last month.
Despite these turbulences, digital assets have shown notable resilience. CoinShares’ internal market sentiment index has significantly normalized since the stress levels observed in February. Bitcoin volatility is increasingly correlated with global growth expectations: a resolution to the Middle East conflict could be a significant bullish catalyst. The week also saw the release of two studies advancing the estimated timeline for quantum computing to threaten current cryptographic standards. The complexity is real, decentralized networks evolve slowly, and any transition takes time. However, developer communities are taking the issue seriously: an Ethereum Foundation researcher co-signed one of the studies, emphasizing the importance given to the issue by protocol teams.
