Trump's One Sentence Halts Oil Rally, Crypto Fights Back

Waking up to find oil prices have collapsed.

The oil price, which was soaring to $110 per barrel just yesterday, experienced a historic crash, plummeting over 30% in a single day, briefly falling below $84 per barrel, dominating headlines across the internet.

In yesterday's article "Why Does Bitcoin Fall When Oil Rises?", we analyzed the relationship between oil and Bitcoin prices. As per the logic we previously discussed, following this morning's oil price crash and the temporary cooling of inflation expectations, Bitcoin staged a significant rebound, reclaiming the $70,000 mark.

This once again demonstrates Bitcoin's characteristic as a "liquidity thermometer." Once the "signal" of high oil prices pushing up inflation subsides, market fears of interest rate hikes ease, liquidity expectations recover, and Bitcoin quickly recovers its lost ground.

This rise and fall also reflects the Trump administration's latest stance on the war situation.

In his speeches last night and this morning, Trump's attitude underwent a subtle yet crucial shift. Although he previously demanded Iran's "unconditional surrender," he stated in his latest press conference that the US-Israel coalition's military operations were "proceeding very smoothly and ahead of schedule," hinting that the primary military objectives had been "largely accomplished."

Simultaneously, Trump hinted at a truce, stating outright that the conflict would be resolved "very soon." While he didn't provide a specific ceasefire timeline, this "mission nearly accomplished" posture greatly alleviated market fears of a "protracted war" and a "full-scale war."

Meanwhile, concerns surrounding the Strait of Hormuz were also significantly eased this morning. The core logic behind the earlier oil price surge was precisely the market's fear of this channel, which handles nearly one-fifth of the world's crude oil, being blocked. Trump played several cards on the supply side today: announcing plans to deploy the US Navy for direct oil tanker escorts, considering exemptions from some energy sanctions to offset Middle Eastern supply gaps, and mentioning the potential release of approximately 100 million barrels of crude oil from Venezuela into the market.

At the same time, G7 finance ministers issued a joint statement indicating a consensus among nations to be ready to release emergency strategic petroleum reserves at any time. With these multi-pronged measures, a large amount of short-term speculative capital began to unwind and retreat near the $120 level.

Is Trump Really About to Call a Truce?

Having researched numerous military analyses this morning, most suggest that, similar to the "just cause" for initiating the war, what Trump is now seeking is a dignified "declaration of victory" and an exit point to withdraw troops, aiming to conclude military operations swiftly and respectably.

From a military perspective, the US military's "decapitation" strikes against Iranian leadership and the large-scale destruction of Iranian air and naval forces in the early stages of the war have already achieved a "major victory" militarily. Therefore, some analysts believe that as long as actual control over the Strait of Hormuz is established, whether through US military or American security company intervention, it is sufficient to ensure the security of the energy passage.

This mentality of "quitting while ahead" stems from the Trump administration's desire to avoid repeating past mistakes. Trump is acutely aware of the Middle East's complexity, fearing that once ground forces are stationed long-term, they could become mired in endless guerrilla warfare and civilian resistance, similar to the Iraq War, ultimately evolving into a costly war of attrition.

What drives Trump's desire to wrap things up quickly is not just military judgment but also more immediate economic "pain points": oil prices and inflation.

The ripple effects of the oil price surge have placed significant pressure on the US domestic economy. As crude prices briefly exceeded $119 per barrel, trucking costs within the US rose markedly. This increase in logistics costs directly translated to higher end-consumer prices, leading to broad-based inflation. Trump understands well that if oil prices cannot be quickly stabilized, runaway inflation will directly threaten his political reputation and could be attacked by opponents as poor governance. Therefore, using the expectation of "the war ending soon" to curb speculative activity in financial markets, thereby causing oil prices to crash back below $90, is a key tactic to alleviate domestic economic tensions.

Furthermore, this analysis suggests that domestic US security conditions and the midterm election agenda are also influencing factors. There are already signs of potential terrorist threats from suspected "sleeping cells" within the US, with arrests of immigrants making bombs in places like New York. This domestic security instability triggered by the war is a driver for Trump's eagerness to "restore peace."

Simultaneously, Trump is pushing hard for the passage of the "Save America Act," attempting to pave the way for the midterm elections through measures like regulating citizenship-based voting. For Trump, he prefers to focus his energy on elections and domestic governance rather than lingering in a war zone that could erupt in terror attacks at any moment and burns money daily. Therefore, he needs to find a balance point within the next one to two weeks to withdraw troops as soon as possible.

So, the framework we discussed in our previous article now has a new variable: the war's duration may be shorter than the most pessimistic forecasts.

If Trump indeed finds that "declaration of victory" exit point in the near future, the geopolitical premium on oil prices will fade faster, the inflation narrative will cool, and the Fed's path to interest rate cuts will reopen. At that point, the liquidity expansion logic discussed by Raoul Pal would no longer be just a medium-term expectation but could arrive faster than most anticipate.

Bitcoin's rebound today might just be a preview.