Tensions in the Middle East are once again influencing not only geopolitics but also global financial markets. Following weekend strikes by Israel and the United States on Iran — during which, according to available reports, Iran’s Supreme Leader Ali Khamenei was killed — speculation has intensified over how the US Federal Reserve might respond. President Donald Trump indicated that military operations will continue. According to some investors, the length and financial burden of a potential conflict with Iran could have significant implications for the crypto market.
One of them is Arthur Hayes, co-founder of the crypto exchange BitMEX. In a recent blog post, he argued that if the United States embarks on costly “nation-building” efforts in Iran, it could pressure the Federal Reserve to loosen monetary policy.
Hayes: Middle East wars often end with monetary easing
Hayes claims that since 1985, every US president has initiated military action in the Middle East — and in each instance, the Federal Reserve responded with interest rate cuts or an expansion of the money supply. In his view, this represents a recurring pattern in which the central bank helps finance expensive geopolitical conflicts.
He points specifically to the 1990 Gulf War, the global war on terror after the September 11 attacks in 2001, and the troop surge in Afghanistan in 2009. During all these periods, he argues, rates were lowered or other forms of monetary easing were introduced.
“The longer Trump engages in the extremely costly remaking of Iran, the higher the likelihood that the Fed lowers the price of money and increases its supply to support Pax Americana’s latest Middle Eastern adventure,” Hayes wrote.
For cryptocurrencies, such a scenario could create a favorable environment. Historically, looser monetary policy, lower interest rates, and higher liquidity have supported risk assets — including Bitcoin and altcoins.
Read also: Crypto Exchanges Waging War Over Fees
“The time to buy comes after the Fed acts”
At the same time, Hayes cautions against drawing premature conclusions. It remains uncertain how long Trump would be willing to spend billions — or even trillions — of dollars on intervention in Iran, and how much geopolitical and market strain he could politically tolerate.
“The prudent move is to wait and monitor developments,” he said.
According to Hayes, the ideal moment for more aggressive purchases of Bitcoin and “quality altcoins” would come only once the Fed actually begins cutting rates or expanding the money supply to support US objectives related to Iran.
In recent months, Hayes has also outlined additional reasons why the Federal Reserve might restart quantitative easing. He has mentioned a new liquidity tool called Reserve Management Purchases, potential stress in the Japanese bond market, and a scenario in which the rapid adoption of artificial intelligence leads to widespread job losses and a subsequent credit crisis.
Markets remain relatively calm
Despite sharp rhetoric and military escalation, financial markets have so far shown limited signs of panic. According to analytics platform Santiment, mentions of “World War III” surged across crypto-related social media following the weekend strikes, but the overall intensity of concern remains significantly lower than in June 2025, when Israeli attacks on Iranian nuclear and military facilities resulted in a 12-day conflict.
The macroeconomic newsletter The Kobeissi Letter noted that the opening of US equity futures did not resemble a global war scenario. On Monday morning, futures on major US indices declined only modestly, oil prices erased roughly half of their initial spike, and the S&P 500 fell by less than one percent.
From an investor perspective, this does not yet represent a shock comparable to past crisis moments. The key question is whether the conflict involving Iran remains contained or evolves into a prolonged and financially demanding campaign.
Read also: Iran gives crypto miners a month to register with the government
What does this mean for retail crypto investors?
For retail investors, the current situation underscores how closely cryptocurrencies are now tied to macroeconomic developments. Bitcoin no longer reacts solely to internal crypto-sector news, but also to Federal Reserve policy decisions, interest rate expectations, and global liquidity trends.
If the Fed were to pivot toward a more accommodative stance in response to rising costs associated with Iran, it could create a supportive backdrop for risk assets. Until such a shift materializes, however, patience may prove to be the more rational strategy.
