Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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Topics covered:

• Middle East tensions Ramp Up.
• This Week's Key Economic Data - Jobs Data.
• Bitcoin Breaking Down?
• Cryptonary's Take.

Middle East Tensions Ramp Up

Over the weekend, we were expecting to hear the Iranians' response to the '15-point proposal' made by the US to end the war. However, this was rejected by the Iranians, who said that the US terms to end the war were "excessive and illogical".

Since then, President Trump has come out this morning and threatened the Iranians further. He has made a social media post where he said he "expects a deal to be reached", but that if the Strait of Hormuz is not "open for business" then the US would leave Iran but conclude their stay by "blowing up and completely obliterating all their electric generating plants, oil wells and Kharg Island (and possibly all desalination plants".

This is escalatory - particularly the threats against desalination plants, as this would cross the 'civilian red line'. And since then, Treasury Secretary Scott Bessent has said that the US will ''retake control" of the Straits.

So whilst President Trump touts that discussions are being had (between the US and the Iranians) and that he expects a deal to be done, he is also ramping up the pressure on the Iranians - the Iranians have denied that talks are taking place.

All of this comes alongside an increased buildup of US troops in the Middle East, with more Marines being deployed there over the last week, and another amphibious assault ship is currently making the journey there. Today, the Washington Post reported that the Pentagon has been planning for potential ground invasion options. This includes ground troops going into Iran to seize almost 1000lbs of enriched uranium, and/or ground troops invading and taking Kharg Island (Iran's major oil export hub).

It seems the Trump administration is pushing for an off-ramp, and a quick one that doesn't make them look weak. However, it can also get worse for the US. Over the weekend, the Houthis (an Iranian-backed militia group in Yemen) have threatened to join the war and close the Bab al-Mandeb Strait. This would really turn the screw on the Trump administration, as it would result in oil prices climbing higher as another key Strait (that's used for transporting oil) would be closed.

Markets haven't traded well off the back of recent escalations, with markets now pricing the likelihood of a rate hike as higher than a rate cut by year-end 2026.

Target Rate Probabilities for 9th December 2026 Fed Meeting

We're not in agreement with this, and we would take the other side of this bet, i.e., we still expect at least 1 interest rate cut in 2026. The reason is that the more prolonged this conflict is, the greater headwind to growth it is, and that'll force the Fed to cut, even if inflation is higher. The Fed is unlikely to hike into higher inflation if it's driven by higher oil prices, which is, and would be the case in this scenario.

Risk assets have reacted poorly in the last week, whilst Bond Yields moved higher due to greater issuance and higher inflation coming down the line. However, Bond Yields have now pulled back as growth (recession) fears increase off the back of higher prices (driven by the higher oil prices).

US2Y Bond Yield

The above suggests to us that there is a flight to safety happening: Bonds are now being bought (recession fears), equities are selling off, and the Dollar is up.

S&P500 1D Chart

The S&P has broken below its key horizontal support of 6500. It's now oversold, so a bounce is possible. But we expect 6500 to become the new resistance and price to reject there.

Ultimately, the current environment for risk assets is poor. Financial markets' liquidity is falling, and has been since mid-Q4 2025, whilst the conflict in the Middle East is looking like it may be more prolonged with escalations likely to come before de-escalations. Alongside this, oil prices are expected to remain elevated, and potentially even continue to trend higher over the coming months, which is going to keep the Fed on hold (rates remain unchanged) whilst economic growth is likely to be negatively impacted.

Once again, this is a poor environment for risk assets, and we expect more downside for them in Q2, and we're positioned accordingly for this - overweight cash.

This Week's Key Economic Data - Jobs Data

The markets' focus is currently on the conflict in the Middle East and on the higher inflation that's likely to come from that, and therefore the labour market data is less important than it has been in recent months - this is due to the Fed now having more of an inflation issue and having to hold rates unchanged because of that.

However, this Friday, we do have a new labour market report. And whilst, likely, it won't change the Fed's near-term outlook, it is possible that it can result in further complications for the Fed.

The forecasted numbers are for the Unemployment Rate to come in at 4.4% and for there to be +55k jobs added. This would be a significant improvement on the last print. If the labour market data comes in anywhere close to in line, the market will move on from it swiftly with the focus remaining on the inflation part of the Fed's dual mandate. We expect markets to trade relatively close to unchanged on the print.

However, should the print come in negatively, i.e., a higher unemployment rate and job losses, the market would likely react badly to that (risk assets down). This would suggest that the labour market is weakening more materially, but the Fed would unlikely be able to react to it because of the current inflation issue. This would put the Fed in a bind because its dual mandate would be in tension. They wouldn't be able to lower rates to help the job market because of the expected significantly higher inflation that's likely to come in the coming months due to higher oil prices from the conflict in the Middle East.

Ultimately, we're not expecting any fireworks from this Friday's print, as the focus is elsewhere (on inflation and the war, rather than the job market, which has hung in there for now). However, should we see a meaningfully weak report, the market would likely react negatively to that - this is the potential outlier we're watching out for.

Bitcoin Breaking Down?

For Bitcoin, we're seeing the price trade at the bottom border of the rising wedge. We can see that the last rising wedge resulted in the price breaking down sharply (the rising wedge built between mid-November 2025 and mid-January 2026).

Whilst we do expect the price to break down from $67k, we don't expect as much downside as there are a plethora of on-chain supports between $54k and $59k. Should price test this area, we would become buyers of Bitcoin again with a view to holding for the next 9-24 months.

Bitcoin Technicals Pattern and Buying Zones

Cryptonary's Take

The conflict in the Middle East continues to be the driving force behind markets. The more prolonged the conflict, the higher the price of oil goes, and the greater the risk-off trade becomes, and the greater the flight-to-safety trade becomes.

Markets are becoming increasingly less confident in President Trump's ability to TACO and risk assets to soar higher as a result of it. Markets are now becoming more aware of the likelihood of a prolonged conflict that keeps oil prices high, the Fed on hold, and the odds of a recession increasing. This has resulted in a poor environment for risk assets, and risk assets have traded negatively on this. In the short-term, we expect this to continue, and we remain overweight in cash.

However, despite the war and the increasing odds of the war catalysing a recession, we would become buyers of Bitcoin (risk assets) at deep value levels. Based on our frameworks and key on-chain cost basis levels, those deep value levels are between $50k and $63k, with the more sizable allocations for Bitcoin coming below $59k.

With Bitcoin currently trading at $67k (near $68k), our stance is patience and remaining overweight to cash.

Key Dates Ahead

• April 3: Labour market report.

This content is for informational and educational purposes only. Cryptonary is not authorised or regulated by the Financial Conduct Authority (FCA) or any other financial regulatory body. Nothing in this publication constitutes a personal recommendation or advice to buy, sell, or hold any virtual asset. Virtual assets may lose their value in full or in part and are subject to extreme volatility. You can lose all invested amounts and do not benefit from any form of financial protection. Past performance does not indicate future results.