The escalating conflict between the US, Israel, and Iran has driven crude oil prices to $115 a barrel, a surge that is now reshaping global monetary policy.
Major central banks, including the European Central Bank and the Bank of England, are responding by adopting a markedly more hawkish stance. The ECB has revised its 2026 growth forecast down to 0.9% while signaling potential rate hikes, a move that has effectively collapsed the probability of an April rate cut to 0%.
The Federal Reserve is also affected. Markets now price only a 4.5% chance of a rate cut by June 2026, down from previous expectations. This tightening environment is directly impacting risk assets. Polymarket odds for Bitcoin reaching $80,000 in April have plummeted to just 0.1%.
The key driver is the fear that sustained high oil prices will reignite global inflation, forcing central banks to prioritize price stability over economic growth. The geopolitical landscape remains the critical variable for the outlook on interest rates and risk assets.