As tensions between Iran, Israel and the United States rise again, there are fears on social media, especially on CryptoX (or CryptoTwitter) that Tehran may shut down the vital oil chokepoint Strait of Hormuz. Many fear the move could cause oil prices and global inflation to spike and disrupt financial markets, including Bitcoin.
However, some observers believe these concerns may be overblown.
Earlier on Saturday, Israel and the United States launched air strikes on Iran aimed at dismantling the country’s nuclear facilities and missile capabilities after talks failed. Iran retaliated by firing ballistic missiles at Israel and U.S. bases in the region, fueling fears of an all-out military conflict.
This has caused unease in the cryptocurrency market, which is the only place where investors can express their fears and risks, while traditional markets remain closed over the weekend.
Bitcoin The leading cryptocurrency by market capitalization fell from around $65,600 to $63,000 before rebounding to $65,000. Oil-related futures on Hyperliquid surged more than 5%.
The fear of Hormuz
The Strait of Hormuz is the chokepoint between Iran in the north and Oman in the south (21 miles wide at its narrowest point) and will carry about 20 million barrels of oil per day in 2024, according to the U.S. Energy Information Administration (EIA).
Of course, amid rising tensions, cryptocurrency accounts on X are concerned that Iran could close the Strait of Hormuz, cutting off oil supplies.
“If a direct conflict begins between the United States and Iran, this is not just a geopolitical issue. This is a global economic event. If the Strait of Hormuz is threatened, oil prices could surge to $120 to $150,” said an X user named @Crypto_Diet.
This could lead to inflationary shocks, market sell-offs, a surge in the U.S. dollar and depreciation of emerging market currencies, the post added.
Several other accounts have expressed similar sentiments, and some astute geopolitical experts have also expressed these concerns.
“Before the strike, oil prices had climbed to six-month highs. Iran is a founding member of OPEC, and about 20% of the world’s oil passes through the Strait of Hormuz. It is now directly implicated.” Geopolitical strategist Velina Tchakarova (Velina Tchakarova) said.
In addition to this, some news outlets have reported that several oil majors, including trading companies, have suspended the shipment of oil and fuel through the strait.
A complete shutdown is unlikely
However, some observers believe that a complete closure of the strait would not be in Iran’s best interests and may not be geographically possible.
Daniel Lacalle, economist, fund manager and chief economist at Tressis, said Iran currently produces 3.3 million barrels of oil per day but only exports half of it, with almost all going to its ally China.
“This would be shooting yourself in the foot,” Lacall said, downplaying concerns that Iran would eventually close the strait.
He added that OPEC members could quickly offset any potential disruption to Iranian oil supplies, while stressing that the United States itself is the world’s largest oil producer.
In other words, any increase in oil prices will be measurable and temporary.
Another aspect to consider is geography. While the strait roughly bisects Iran and Oman, the channel is primarily in Omani waters. Because it is said that the water on the Iranian side is shallower, while the water on the Oman side is deeper, which is more suitable for the movement of large tankers.
So, technically, ships can pass through Oman’s shipyards, meaning Iran’s closure of its territory likely won’t have much of an impact on supplies.
“Most of the waterways are in Oman, not Iran,” said energy market expert Dr. Anas Alhajji.
“Despite all the wars, the Strait of Hormuz has never been blocked – it can’t be blocked. It’s too wide. It’s very well protected,” he added.
All things considered, the likelihood that Iran will close the strait and cut off oil supplies is low. Still, an all-out war could spark widespread risk aversion, potentially causing Bitcoin to fall below the widely watched support level of $60,000.
Meanwhile, Bitcoin’s price chart also suggests that the bear market could deepen amid the Middle East crisis.
