The ceasefire was supposed to hold.
On Wednesday, a US fighter jet fired on an Iranian oil tanker in the Gulf of Oman as it attempted to breach the American blockade of Iranian ports according to BBC. The same day, Iran struck the UAE with 12 ballistic missiles, three cruise missiles, and four drones, hitting critical energy infrastructure in the Fujairah oil zone. Four missile alerts ordered UAE residents to shelter. Commercial planes bound for Dubai and Abu Dhabi turned around mid-air.
This is happening while both countries are officially in a ceasefire.
Trump responded on social media. “If they don’t agree, the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before.” Hours later he added that Iran wants to make a deal and “we’ll see if we get there.”
The Strait of Hormuz, the 21-mile channel that carries 20% of the world’s crude oil, remains effectively closed. Iran established the Persian Gulf Strait Authority on May 5, requiring ships to coordinate with Iranian authorities before transiting. The US has simultaneously enforced a naval blockade on Iranian ports since April 13. Two competing blockades. One strait. No clear resolution.
Why Bitcoin Cannot Be Separated From This Story Anymore
When we first reported Iran’s crypto toll system in March, it was treated as a curiosity. A sanctioned state charging Bitcoin for maritime access through a critical chokepoint. Interesting but peripheral.
Then Iran officially confirmed Bitcoin as payment for Hormuz transit. Then the US froze $344 million in Tether to punish Iran and could not touch a single Bitcoin. Then the ceasefire triggered a short squeeze that wiped out $427 million in Bitcoin short positions. Then Iran attacked the UAE, the ceasefire fractured, and now a US military jet has fired on an Iranian tanker in the same waters where Iran was collecting Bitcoin tolls two months ago.
Bitcoin is not reacting to this conflict from a distance. It is embedded in the specific geography where the conflict is being fought.
The Escalation Timeline
The US military fired on Iranian forces and sank six small boats targeting civilian ships as it moved to reopen the Strait of Hormuz on Monday. That was May 4.
May 5, a US fighter jet fired on an Iranian oil tanker attempting to breach the blockade. The attack occurred as Iran and the US are officially in a ceasefire and as the two countries seemed to be approaching an agreement to end the war.
The same day Iran struck UAE infrastructure. The UAE’s UN ambassador confirmed Iran attacked the UAE on May 4 with 12 ballistic missiles, three cruise missiles, and four drones which resulted in a fire on critical energy infrastructure in the Fujairah oil industry zone.
Oil prices continue to soar. US gas prices hit $4.46 a gallon, the highest level in nearly four years. One oil market expert told CNN that gas prices could reach $5 a gallon if the strait remains closed.
What the Bitcoin Market Is Pricing
Bitcoin Volatility Spiked as The US Military Just Attacked an Iranian Oil Tanker at Hormuz – Source: Tradingview
Bitcoin has reclaimed $80,000 this week despite the escalation. That price action tells you something specific. The market learned during the initial conflict that Bitcoin behaves differently in this war than in previous geopolitical crises. It is not selling off on escalation the way it did during the initial Iran strikes in February. It is holding.
Part of that is the short squeeze setup. Funding rates have been negative for weeks and every escalation headline that should have crashed Bitcoin has instead squeezed the bears who were positioned for exactly that outcome.
Part of it is something more structural. Bitcoin is now documented as a payment mechanism in the specific conflict zone driving oil prices, inflation expectations, and Fed policy simultaneously. The asset is no longer peripheral to the macro story. It is inside it.
The Deal That Is Not There Yet
Trump said Iran wants to make a deal. Trump posted on social media that the war could soon end and oil and natural gas shipments could restart. But that all depends on Iran accepting a reported agreement the president did not detail.
The ceasefire with Iran is on shaky ground amid apparently competing priorities between hardliners and moderates in Iran, and its future could hinge on what happens in the Strait of Hormuz.
The shipping industry has no clarity. Shipping executives say there is no specificity about which countries have asked for the humanitarian mission, nor how it may be coordinated with Iran, if at all.
Iran’s new Strait Authority is demanding coordination before any vessel transits. The US is saying it will force the strait open. Those two positions cannot both be true simultaneously. One side will have to back down or the shooting continues.
Every time the ceasefire held, Bitcoin rallied. Every time it frays, the picture becomes more complicated for risk assets broadly. But the short squeeze fuel is still loaded. The bears are still paying. And the institutional buyers who have been accumulating through all of it have not shown any sign of stopping.
The Strait of Hormuz has been the most important geography in Bitcoin’s price history for the past ten weeks. Wednesday’s escalation suggests it is not done yet.
