The week was once again dominated by developments in the Gulf. The markets initially rebounded strongly, driven by hopes for a quick resolution to the conflict, fueled by the announcement of a televised address by Trump. These hopes quickly dissipated, causing another rise in oil prices and increased pressure on bond markets. Equity investors continue to bet on a quick resolution, but Iran is in no hurry to end the conflict: the extension benefits it through transit revenues in the Strait of Hormuz and supported oil prices. Gulf monarchies are beginning to discuss alternative routes for their pipelines, but these projects are costly and will take several years.
Inflationary fears complicate monetary policy
Foreign central banks have reduced their sales of US Treasury bonds, exacerbating tensions in bond markets. The ISM manufacturing index reached its highest level in four years, but this growth is mainly due to the “prices paid” component: a sign of pressure on production costs rather than a real demand dynamic. Faced with a potential inflationary shock, central banks find themselves in a delicate position: lowering rates would be risky, but rate hikes seem unlikely in a context of slowing consumption. Employment data, expected soon, will be closely watched following a particularly disappointing report last month.
Digital assets resist, quantum risk takes the stage
Despite these turbulences, digital assets have shown remarkable resilience. CoinShares’ internal market sentiment index has significantly normalized since the stress levels observed in February. Bitcoin volatility is now increasingly correlated with global growth expectations: a resolution of the conflict in the Middle East could be a significant bullish catalyst.
The week also saw the release of two studies that significantly advance the estimated timeline for quantum computing to threaten current cryptographic standards. The complexity is real, decentralized networks evolve slowly, and any transition takes time. However, developer communities are taking the issue seriously: a researcher from the Ethereum Foundation co-authored one of the studies, highlighting the importance placed on the issue by protocol teams.
