Bitcoin tops $65k, but escalating Iran tensions and rate jitters cap gains

Bitcoin ticked up on Monday to top $65,000 after moving little over the weekend as caution over worsening U.S.-Iran tensions and rising interest rates left markets largely averse towards cryptocurrencies.

The world’s largest crypto gained 1.5% to $65,358.3 by 17:44 ET (21:44 GMT), largely remaining in a trading range seen most of this year as sentiment towards crypto stayed weak. Bitcoin was also trading about 50% below an October record high and was nursing deep YTD losses. 

U.S.-Iran tensions flare further after deaths of service members 

Washington and Tehran ramped up their rhetoric against each other amid continued fighting. The U.S. military has now pounded Iran for ten consecutive days with strikes, prompting attacks from the country on critical infrastructure sites across the Gulf region.

On Sunday, U.S. Central Command said three service members had been killed by Iranian attacks.

"Every time Iran kills an American Soldier they will pay for that killing many times over! This directive has been passed on to Secretary of War, Pete Hegseth, Chairman of the Joint Chiefs of Staff, Daniel Caine, and every Leader in the Military," President Donald Trump posted on his Truth Social service on Monday.

The escalation in tensions this month represents the biggest breakdown in relations since the U.S. and Iran inked an interim peace agreement in mid-June. Iran’s Fars News Agency over the weekend reported that Tehran had officially suspended its commitments under the peace deal, citing Kazem Gharibabadi, the country’s deputy foreign minister for legal and international affairs.

Iran’s state media on Monday reported that President Masoud Pezeshkian told a session of the Supreme Judicial Council that Tehran was now engaged in a "full-scale war" with the U.S. that extended well beyond missile strikes.

Control over the Strait of Hormuz remains a key sticking point, with Iran repeatedly asserting its right over the vital waterway. The country’s military claimed to have intercepted vessels attempting to traverse the chokepoint. Against this backdrop, ships have become increasingly cautious, with Kpler data showing only 30 verified crossings over the weekend.

There was still a glimmer of hope for a diplomatic resolution. Secretary of State Macro Rubio on Sunday said that the U.S. was open to holding talks with Iran, noting that Washington would be "happy" should the opportunity to pursue more discussions arise.

Iran, for its part, has suggested that negotiations with the U.S. could be pursued based on national interests. A spokesperson for the Iranian foreign ministry also said that mediators have issued proposals attempting to prevent a further escalation in the fighting.

Against this backdrop, oil prices have surged once again, reigniting concerns over energy-driven inflation and interest rate hikes by the Federal Reserve to combat it. While the central bank is widely expected to leave rates unchanged during its July meeting, traders will not get any cues on policy this week amid the Fed’s communications blackout period. 

High rates bode poorly for speculative and non-yielding assets such as Bitcoin and crypto.