Markets endured another volatile week shaped by developments in the Gulf. An initial rally, driven by expectations of a diplomatic breakthrough following the announcement of a televised address by Trump, reversed sharply as those hopes faded. Oil prices climbed again, bond markets came under renewed strain, and equities continued to price in a swift resolution that the underlying dynamics may not support. Iran has clear strategic incentives to prolong the conflict: Strait of Hormuz toll revenues and elevated oil prices both serve its interests. Gulf monarchies are exploring alternative pipeline routes, but those projects are expensive and will take years to materialise.
Inflation risk complicates the rate outlook
Foreign central banks have been accelerating their sales of US Treasuries, amplifying pressure on bond markets. The ISM manufacturing index reached a four-year high this week, though the move was largely driven by the “prices paid” sub-index — a reflection of input cost pressure rather than genuine demand momentum. The Federal Reserve faces a difficult path: an inflationary shock limits scope to cut rates, while weakening consumption reduces the case for hikes. Employment data due shortly will receive close attention after last month’s particularly weak print.
Digital assets hold firm; quantum risk enters the frame
Despite macro turbulence, digital assets have shown notable resilience. CoinShares’ internal sentiment index has normalised materially from the stress levels recorded in February. Bitcoin’s variance is now increasingly correlated with global growth expectations — a dynamic that suggests a Middle East resolution could serve as a meaningful upside catalyst.
Two research papers released this week also brought forward the estimated timeline for quantum computing to threaten current cryptographic standards. Developer communities are responding: a researcher from the Ethereum Foundation co-authored one of the papers, signalling that core protocol teams are treating the issue as a near-term priority. No immediate risk exists, but advisors with digital asset exposure should begin monitoring protocol-level quantum-resistance developments.
Portfolio implications
The current environment — sticky geopolitical risk, building inflationary pressure, and bond market stress — reinforces the case for diversification across uncorrelated return streams. Bitcoin has continued to demonstrate resilience relative to traditional risk assets through this period. Advisors should review whether current digital asset allocations appropriately reflect their clients’ objectives and risk tolerance.
For more news, information, and strategy, visit the CoinShares Crypto ETF Hub.
