Tuesday brought a rise in Bitcoin toward $80,000, following comments from US President Donald Trump that suggested the US-Iran war might come to an end. That prospect pushed oil prices down, and the cryptocurrency responded by erasing its weekend losses. According to TradingView data for BTC/USD, it gained about 3% on the day.
As traders weighed mixed signals from Trump, who posted on Truth Social that Iran wants a deal and that the US is open to engagement, the move followed. “The failing Nation of Iran wants to make a deal, quickly and badly. I will determine whether or not the U.S.A. will choose to engage – The concept of which we are open to,” he wrote.
Trump’s Posts on Oil and War
Trump later pushed back on his forecast for cheaper oil, even as he indicated the fight with Iran may be drawing to a close. In a separate Truth Social post, “With the temporary exception of Oil, prices are coming down sharply, and Oil will drop like a rock as soon as the Military Conflict with Iran is over, and that will not be long,” was quoted as saying.
The posts pushed oil prices lower. US WTI crude oil remained above $100 per barrel at the time of writing, while Brent crude traded at $105 per barrel. US stocks initially rose at Monday’s Wall Street open but later turned lower amid uncertainty over Middle East oil routes.
At the time of writing, the S&P 500 had dropped 0.3%. The conflict had grown past Iran, putting both Saudi Arabia’s East-West pipeline and the Bab El-Mandeb Strait at risk alongside the Strait of Hormuz.
Oil Prices Dipped on the Posts
The latest data from CME Group’s FedWatch Tool puts the odds of a hike at 92.7%, up from 59.4% a week ago. Markets now see a 25-basis-point Federal Reserve rate hike to 3.75-4% as likely, with the decision set for Wednesday.
Trading company QCP Capital predicted that continued high oil prices would directly impact US financial policy. “A prolonged disruption would increase the risk of higher energy costs feeding into transport and logistics pricing, potentially lifting inflation expectations and constraining the Fed’s ability to pause tightening even as growth slows,” QCP wrote on Monday.
“This dynamic creates policy tension: continued energy prices could keep the Fed restrictive, while economic data weakness from higher energy costs could argue for patience.”
Bitcoin Tests Its Long-Term Trend Line
Bitcoin tested its 50-week exponential moving average after closing below the key trend line on Sunday. The 50-week EMA represents a support target for Bitcoin bulls to reclaim as part of a bull-market comeback, as previously reported by Cointelegraph.
On Monday, BTC/USD climbed back above its 50-week EMA at $77,430, even though it first closed the weekly candle below it.
Fed Language Now Matters More Than the Decision
QCP argued that risk assets had already priced in a 0.25% hike, with less volatility expected as a result. The firm noted that the overall muted response to last week’s Consumer Price Index (CPI) inflation data meant that Fed officials’ language now mattered more than the decision itself.
“This containment reflects a shift in focus: the binary question of whether the Fed will hike has been answered; the critical issue for positioning is now how policymakers frame the move and what it signals about the path ahead,” QCP wrote.
The Oil Connection
Iran’s war with the US has pushed oil prices upward, and Trump’s social media postings imply he thinks an end is drawing near. A drop in oil prices might take some pressure off inflation in the US economy, potentially giving the Federal Reserve more breathing room to stop raising interest rates.
The fighting has spread past Iran, now putting pipelines and straits across the Middle East at risk. If the trouble drags on, energy prices may stay high, which would limit how much the central bank can lower rates.
What to Watch This Week
The week’s key events fall in this order:
- The Federal Reserve decision on interest-rate changes
- Fed officials’ language on the move
- Whether Bitcoin holds above its 50-week EMA
- How oil prices respond to any Iran deal news
Why the Fed’s Words Matter Now
It matters greatly no longer whether the Fed raises its rate, but how it chooses to frame that move. Since a hike appears probable, investors will watch closely for any signs the central bank gives about how quickly it plans to tighten further.
The Oil Connection
Iran’s ongoing conflict has kept oil prices up, and Trump’s posts point to his belief that a resolution is drawing near. A dip in those prices would take some pressure off US inflation, which might allow the Fed to put a hold on its tightening campaign.
The fighting has spread past Iran, putting pipelines and straits in the Middle East at risk. If the trouble drags on, energy prices could stay high, taking away some of the room the central bank has to lower rates.
What Happens Next
Bitcoin’s near-term path depends on two things: the Fed’s decision and the Iran situation. A dovish Fed would reduce pressure on the cryptocurrency, while a hawkish stance could weigh on it.
The market will be watching both closely this week.
The long-term trend line is currently being tested by Bitcoin, which has moved back above $79,000.
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