The Breakdown - How the Markets Are Handling the Latest in Iran

Episode Date: June 24, 2025

The US has officially entered the conflict with Iran, bombing nuclear enrichment sites and raising fears of escalation. NLW explores immediate reactions across markets—from oil price spikes and stock market jitters to rising inflation risks and crypto volatility. He discusses whether the critical Straits of Hormuz might close, the geopolitical chess moves involving China and Russia, and why Bitcoin remains a crucial indicator of global sentiment. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Monday, June 23rd, and today we are talking about what it means for markets that the U.S. has joined the conflict in Iran, from oil to stocks, to inflation, and beyond. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers, You can find a link in the show notes or go to bit.ly slash breakdown pod. Late on Saturday night, early on Sunday morning, depending on where you are, the U.S. joined the conflict in Iran, dropping bunker buster bombs on three nuclear enrichment facilities. Reports differ on the extent of the damage. President Trump characterized the strike as

very successful, and in an interview from the White House declared that Iran's facilities had been completely and totally obliterated, but as satellite images became available, there has been a little bit more of a question. Eric Schmidt of the New York Times reported that anonymous sources within the administration said that the bombing, quote, did not destroy the heavily fortified facility but severely damaged it. When asked if he has 100% confidence that Iran's nuclear sites were completely destroyed during a Sunday show appearance, Vice President J.D. Vance sidestepped the question stating, I feel very confident that we've substantially delayed their development of a nuclear weapon, and that was the goal of the attack. Now, of course, at this point, all eyes are on potential escalation.

Small anti-war protests have sprung up in multiple U.S. cities. Democratic lawmakers. are pointing out that these strikes were conducted without congressional approval or a former declaration of war, but none of that really matters as compared to what comes next. Iran exchanged further missile fire with Israel on Sunday in the wake of the bombing. Estimates vary, but the general consensus is that half of Iran's missile stockpile has either been depleted or destroyed over the first 12 days of the conflict. That would conform with reports of increasingly sophisticated missiles being deployed over the weekend, suggesting stocks of more basic weaponry are running dry. Now that the U.S. is directly involved in the conflict, many think that

Iran might turn their sites to U.S. bases scattered throughout the Middle East, although obviously those bases are going to be on extremely high alert from here on out. Now, aside from short-term kinetic retaliation, the biggest economic question surrounds the Straits of Hormuz. The straits are the narrow single exit out of the Persian Gulf. Around 20% of global oil supply moves through the straits, including 90% of supply from the Gulf states. A shutdown of the shipping lanes could impact Iran's own oil exports, which largely go to China, but the shutdown could also be devastating for the oil trade out of Saudi Arabia, the UAE, and smaller producers in the region. On Sunday, the Iranian parliament approved the closure of the straits.

This doesn't necessarily mean physically stopping sea traffic. Instead, a single attack on a merchant vessel could mean insurers will no longer cover transit through the region. That would make shipments un-economical or even impossible and have similar results to a physical blockade. Secretary of State Marco Rubio has called for China to place a call to Tehran and keep the straits open. In an appearance on Fox News on Sunday, he said, if they close the straits,

it will be economic suicide for them, and we retain options to deal with that, but other countries should be looking at that as well. It would hurt other countries' economies a lot worse than ours. While China takes nearly all of Iran's oil, they are also highly dependent on shipments out of Saudi Arabia and the UAE. Meanwhile, the U.S. is fairly close to energy independence and a little more insulated from a shutdown of the Straits. The UAE has some capacity to bypass the straits via overland pipeline, but that trade route can't manage the entire capacity. Vandahari, founder of energy intelligence firm Vanda Insights, is fading the threat basically entirely stating that the possibility is, quote, absolutely minimalistic. She said that there was, quote,

very, very little to be achieved and a lot of self-inflicted harm that Iran can do. Andrew Bishop, the Global Hut of Policy Research at Sigmundum Global Advisors, said there was also very little reason to antagonize China at a time, quote, when there is little reason to doubt U.S. and Israeli resolve in being trigger-happy. His view was that, quote, the best strategy for Iran would be to rattle Hormuz oil flows, just enough to hurt U.S. via moderate upward price movement, but not enough to provoke a major U.S. response against Iran's oil production and export capacity. Speaking of which, the oil price saw a 3% surge on Sunday, as future markets opened, but traders faded the price spike. Prices remain in a one-week range around $77 per barrel,

which, while still elevated, up from $62 at the beginning of the month, still isn't crazy. May had seen oil prices hit a three-year low, meaning there's still plenty of room before a crisis point. Still, Goldman Sachs analysts are forecasting the mother of all oil spikes to come down if the straits are actually closed. They warned that Brent Crude would quickly rise to $100 a barrel and peak at $110 in that event. The oil price peaked at 112 in June of 2022, which at least contributed to the largest global inflation spike in generations. The analysts don't have a high conviction that the straits will actually be closed, though, handicapping the likelihood at 52%, citing polymarket odds as their source. That market has since plunged to 43% as the weekend plays out.

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Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. Even without a blockade, many are still expecting oil prices to rise over the summer. Jorge Leon, the head of geopolitical analysis at Ristad Energy said, an oil price jump is expected. Even in the absence of immediate retaliation, markets are likely to price in a higher geopolitical risk premium.

Saqavonic, an energy analyst at MST Marquis, said, this could set us on a path towards $100 oil if Iran responds as they have previously threatened to. This U.S. attack could see a conflagration of the conflict. In stocks, the trade was also to fade out-of-control escalation. S&P 500 futures opened Sunday night down 1%, but quickly recovered to levels from Friday night's close. The same was true across major global stock. markets's Monday session played out globally. The general sense is that the catalysts are on board

for a major shock, but traders are waiting to see how the next chapter actually plays out before making a move. Ante Suvali, a strategist at UBS said, markets will react, but probably still modestly in equity markets. Investors will also have to think about the impact of higher oil on inflation. Indeed, if the result is higher inflation, then this is a story that will play out over months rather than hours. For some, the uncertainty of the moment isn't all that different from the months of tariff backflips and other volatility out of the administration. Josh Gilbert and analyst at E. Toro said, this kind of uncertainty is quickly becoming the new normal for markets,

so I expect to see a relative sense of calm unless we see tensions keep rising, which, to be clear, it has the potential to do. Even without an immediate fallout, the mix of oil volatility and renewed uncertainty is likely to be enough to keep risk appetites subdued. This lack of risk appetite could, in fact be partially to blame for the lack of price action following the weekend events. Gareth Ryan, the founder of UIR Capital, discussed a lack of interest on both sides of the options market, stating, selling volatility at current levels inherently carries the risk of a volatility event, but paying out premiums with the expectation of a spike higher in vol,

also means holding a wasting asset. Essentially, there's very little interest in betting on a big volatile move with options already richly priced, but at the same time, market makers don't want to be holding a lot of risk in case of a big event. Earlier in the week, Antoine Porcherat, the head of institutional structuring at Citigroup had said, on the more tactical side, there is a general lack of scalable opportunities across the board on repo, correlation, and volatility. Historic dislocations are just not there at the moment.

Summing up, the Kobayisi letter commented, to all the people calling for World War III, the market respectfully disagrees. The story in crypto markets was a bit more amplified. Bitcoin bled lower over the weekend, briefly dipping below $100,000 as news of the bombing broke, but it entered the week trading at around $102,000. Lower than the $109,000 level reached last Monday, but certainly not dire. We're now a month out from the previous all-time high, and the longer-term uptrend is starting to roll over. As always, many were ready to declare Bitcoin a failed safe haven for selling off a few percentage points during a shock. QE Infinity wrote, Bitcoin isn't a safe haven asset. It repeatedly fails when times get really tough. I don't make

the rules. Still others have a time horizon that extends beyond a few hours. Legendary Bitcoin investor Tim Draper tweeted, in uncertain times one thing is valuable everywhere. Bitcoin. Travels across borders, decentralized, immutable, liquid global, the ultimate hedge against government spending. Now, for those of you who are trying to win arguments with your friends and family at home about this, the reality is that Bitcoin is still the most liquid market that's trading 24-7. If you want to know how the market's going to react to something, you go watch Bitcoin. It's going to be your leading indicator of everything else, even before polymarket and calci and all the betting markets.

One of the reasons I could tell that the market was kind of fading a big response, even over the weekend, is the Bitcoin just didn't move nearly as much as you would expect if we really were headed towards a big geopolitical crisis. Now, to some, thinking in the longer term, they believe that escalation could drive Bitcoin higher. Alex Thorne of Galaxy Digital looked at how risk assets moved following the Iraq invasion of 2003. The Dixie was down 7% within three months and 13% within a year, but the S&P 500 is up almost 14% in three months and 25% a year out. Plenty of people shouted down the numbers, which Alex presented without comment. Ramalawalia of Lumina Wealth commented,

No invasion here. Not sure why people see this as Iraq War 2.0. Bitmex co-founder Arthur Hayes still believes this all has a predictable outcome, tweeting, do you hear that? It's the sound of the money printers revving up to do their patriotic duty. This weakness shall pass and Bitcoin will leave no doubt as to its safe haven status. Now, there is still a lot going on. One piece of the chessboard to monitor is, of course, Russia, where high-ranking officials are saying that other countries are ready to supply Iran with their own warheads.

Kaua'ezi letter even tweeted, The biggest news this weekend is the one with the least attention. Did Russia really just say countries are ready to supply Iran with nukes? If so, why is this not getting more attention? Anyway, right now, we are still on hour-by-hour changes with a number of different actors that can move the needle meaningfully. I'm sure we will be checking in on this throughout the week. But for now, that is the story as we're seeing it,

and that is going to do it for today's breakdown. I appreciate you listening as always, and until next time, be safe and take care of each other. Peace. Thank you.