"Hormuz Blockage Leads to Bond Market Collapse"...Bitcoin Draws Attention Amid Liquidity Fears

▲ Iran, Strait of Hormuz, Bitcoin (BTC)/AI generated image

As the impact of the Strait of Hormuz blockade spreads to a sell-off in the national bond market and a liquidity crunch, the vulnerability of the global financial system is once again highlighting Bitcoin's raison d'être.

According to Benzinga on May 27 (local time), the global national bond market faced across-the-board selling pressure last week. Benzinga viewed the sharp rise in sovereign bond yields on Friday not as a simple fear of inflation, but as a structural shock stemming from the blockade of the Strait of Hormuz. The strait was mentioned as a passage for approximately 20% of the world's oil supply and one-third of seaborne oil.

Benzinga explained that control of the strait would lead to a surge in oil prices, sharply worsening the terms of trade for net oil-importing countries such as the European Union (EU), Asia, and the UK. Countries like the UK and France, where the trade balance is a major cause of the current account deficit, face pressure to widen their deficits along with increased energy import costs. To cover the expanding deficit, they must either sell foreign exchange reserves or issue more debt, both of which were presented as factors driving up bond yields.

The sale of US Treasury bonds leads to lower bond prices and higher interest rates, and additional Treasury issuance demands higher interest rates to attract investment demand in the global bond market. Benzinga also pointed out that the petrodollar recycling, which Gulf oil-producing countries used to send back to US Treasuries, is weakening, shaking a structure that has served as a hidden safety net for global liquidity for decades.

Benzinga characterized this trend not as an inflation issue but as a global liquidity crisis and balance of payments pressure. Rising interest rates tighten credit conditions, slowing growth exacerbates fiscal deficits, and more government bond issuance adds further burden to an already weakened market's absorption capacity. Benzinga described this vicious cycle as a typical doom loop that is difficult to resolve without a massive injection of liquidity.

Finally, Benzinga mentioned Bitcoin (BTC), stating that capital is moving to assets outside the vulnerable existing liquidity system. The key rationale presented was that Bitcoin is a fixed-supply asset that does not rely on petrodollar recycling, current account pressures, emergency liquidity provisions, or central bank balance sheet expansion.

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