Bitcoin and the broader cryptocurrency market extended their decline over the weekend as escalating tensions in the Middle East pushed crude oil prices sharply higher, reigniting inflation fears and prompting investors to pull back from risk assets.

The world’s largest cryptocurrency fell to around $67,000 on Sunday from last week’s high of about $74,000, marking a drop of nearly 10 per cent in a matter of days. The sell-off reflects a broader retreat across digital assets as geopolitical uncertainty and surging energy prices reshape global market sentiment.

An index tracking the top 20 cryptocurrencies declined 1.29 per cent over the past 24 hours, while the widely followed Crypto Fear and Greed Index plunged to 18, a level indicating “extreme fear” among investors.

Market analysts say the sharp move in oil prices has played a critical role in triggering the latest wave of crypto volatility. Crude oil surged after the intensifying war involving Iran disrupted supply flows across the region and heightened fears of prolonged instability in global energy markets.

West Texas Intermediate (WTI) crude, which ended last week near $90 a barrel, is forecast to soar beyond $115, while Brent crude — the international benchmark — is expected to hit the key $120 level, its highest range since 2022.

Energy markets have been shaken by disruptions around the Strait of Hormuz, one of the world’s most strategic oil chokepoints through which roughly a fifth of global crude supply passes. The conflict has forced several Gulf producers to adjust output and logistics, tightening global supply and sending prices sharply higher.

Higher oil prices tend to ripple quickly through global financial markets because of their impact on inflation. When energy costs rise sharply, transportation, manufacturing and consumer prices typically follow, raising concerns that inflation may accelerate again after months of easing.

That dynamic is particularly significant for cryptocurrency markets, which have been highly sensitive to changes in global liquidity and interest-rate expectations.

Recent economic data from the United States had indicated that inflation was gradually cooling, raising hopes that the Federal Reserve could begin cutting interest rates later this year. However, the sudden surge in energy prices threatens to complicate that outlook.

Economists surveyed by Reuters expect the upcoming US Consumer Price Index (CPI) report this week to show that headline inflation edged up to 2.5 per cent in February from 2.4 per cent in January. Core inflation, which excludes volatile food and energy prices, is also expected to come in around 2.5 per cent.

If inflation proves stickier than expected, the Federal Reserve may delay interest-rate cuts — a scenario that typically pressures risk assets including cryptocurrencies.

Data from prediction market Polymarket suggests traders have already scaled back expectations for aggressive rate cuts in 2026 as the geopolitical conflict raises the prospect of higher global inflation.

Bitcoin’s recent performance also reinforces a growing debate among investors about whether the cryptocurrency can truly function as a safe-haven asset during periods of geopolitical stress.

While some proponents argue that Bitcoin offers protection against currency debasement and inflation, recent market behaviour suggests that the digital asset often trades more like a high-risk technology stock rather than a defensive store of value.

“Bitcoin’s price is convincingly in deep bear-market territory now,” said CK Zheng, founder of crypto investment firm ZX Squared Capital. “We expect a further 30 per cent price drop during 2026 as the Iran war started and macro uncertainty increases.”

According to Zheng, Bitcoin’s well-known four-year market cycle may also be reinforcing the current downturn.

The cryptocurrency historically experiences a surge after its mining reward “halving” — an event that reduces the rate at which new bitcoins are created. The most recent halving occurred in April 2024, lowering the reward to 3.125 BTC per block.

Prices have historically peaked roughly 16 to 18 months after a halving before entering a bear phase lasting about a year. Bitcoin’s record high above $126,000 in October 2025 fits that pattern, suggesting the market may now be moving through the downward phase of the cycle.

“Individual investors tend to buy during hype and sell during panic,” Zheng noted. “That behaviour reinforces the boom-and-bust four-year pattern that has defined crypto markets for more than a decade.”

However, not all analysts share the pessimistic outlook.

Research firm Bernstein described the current downturn as “the weakest bear case in Bitcoin history,” pointing to continued institutional inflows and the growing role of spot Bitcoin exchange-traded funds.

Bloomberg data shows that spot Bitcoin ETFs attracted roughly $4.2 billion in net inflows during the first quarter of the year, signalling that institutional interest in the asset class remains resilient despite market volatility.

For now, investors are likely to keep a close watch on both macroeconomic signals and developments in the Middle East.

Alongside the inflation data, traders are monitoring key developments within the crypto ecosystem itself. The Pi Network community is preparing for its annual Pi Day event later this week, while Polkadot is scheduled to roll out a major tokenomics upgrade on March 12 — events that could influence sentiment in the broader digital asset market.

Still, analysts say the immediate direction of crypto prices may depend less on industry developments and more on global macro forces — particularly oil prices, inflation trends and central-bank policy.

With crude oil trading near multi-year highs and geopolitical tensions showing little sign of easing, markets across both energy and digital assets are bracing for continued volatility in the weeks ahead.

Look: UAE ministry releases photos of Iranian missile fragments