Bitcoin Recovery Seen as Fragile as Iran War Fallout Expected to Dominate 2026 Markets

Bitcoin (BTC) recovery remains fragile as geopolitical tensions tied to the ongoing Middle East conflict continue to pressure financial markets. If the conflict ends soon, its economic consequences are likely to dominate market sentiment throughout 2026, particularly during the second quarter. Puckrin said expectations for interest rate cuts remain uncertain, noting he does not expect reductions until late Q3 or Q4, if they occur at all.

Bitcoin closing the week above $71,000 could signal continued upward momentum, though resistance remains near the $74,000 level, while the asset still trades below its 200-day exponential moving average.

Inflation Pressures and Policy Uncertainty Weigh on Market Sentiment

The ongoing conflict has contributed to rising inflation, according to the U.S. Bureau of Labor Statistics (BLS) Consumer Price Index report, reducing optimism around monetary easing in 2026. Interest rate decisions from the Federal Open Market Committee (FOMC) remain divided, with officials warning that persistent inflation above the 2% target could even lead to a rate hike.

Market data from the CME FedWatch Tool indicates more than a 98% probability that the current 350–375 basis point target rate range will remain unchanged at the April 29 and June 17 meetings. Expectations shift later in the year, with about a 65% chance of holding rates steady at the July 29 meeting and a 33.6% probability of a 25-basis-point cut.

Failed Negotiations and Naval Blockade Trigger Market Volatility

Bitcoin previously climbed about 5.8% from April 6, briefly rising above $73,000, before retreating to around $71,000 on April 11 after failed negotiations between the United States and Iran. Analysts at Kobeissi Letter described the breakdown as a worst-case scenario for markets. Following the stalled talks, U.S. President Donald Trump ordered a naval blockade around the Strait of Hormuz, directing naval forces to intercept vessels paying tolls to Iran, a move that further intensified uncertainty across global markets.

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