Markets Price in Resolution to Geopolitical Tensions: A Catalyst Needed for Crypto

Global markets have been experiencing increased volatility in recent weeks, driven by concerns over ongoing geopolitical tensions. However, according to Jurrien Timmer, director of global macro at Fidelity Investments, conditions are not as dire as they might appear.

Timmer argues that markets are 'pricing in some form of resolution' to the current crisis, particularly around Iran. He notes that the futures curve for oil remains in backwardation, with contracts further out trading roughly $40 below the front month. This structure signals that markets view the current supply disruption as a short-term bottleneck rather than a prolonged crisis.

The S&P 500 has recovered from its lows, with a drawdown closer to 1% after falling around 9%. Credit spreads remain contained, suggesting limited systemic stress. Even in traditionally defensive assets, such as gold and bonds, signals are nuanced. Timmer attributes this in part to global capital flows, which may be influenced by countries facing constraints in moving energy through the Strait of Hormuz.

Bitcoin has also been impacted by the geopolitical uncertainty, but Timmer sees it forming a base at $65,000. He notes that with fewer 'paper hands' left in the market, selling pressure has largely been absorbed. Gold, on the other hand, appears more vulnerable to a pullback after its strong run.

Timmer remains bullish on both assets and believes they are technically interesting. However, he emphasizes that a catalyst will be needed to drive the next leg higher for bitcoin.