Bitcoin has made a steep dive on Sunday as Iran’s parliament approves a draft bill to close the Strait of Hormuz which serves as a critical global oil route. The move follows heightened tensions in the Middle East after the United States bombed three Iranian nuclear facilities on Saturday night. This escalated the geopolitical tensions between Iran and Israel further with the U.S entering the war officially. 

Following the tensions, Bitcoin has dropped below the psychological $100K mark, bottoming around $98,800 level. Additionally, the crypto market has experienced over $1.1 billion in liquidations as investors react swiftly to flee the market. Further escalation of the war risks adverse effects on the crypto market. 

Iran Moves to Close Strait of Hormuz Escalating Tensions

According to reports, Iran’s parliament has voted to approve a proposal that would close the Strait of Hormuz, one of the world’s most vital oil chokepoints. While the move still awaits ratification by the Supreme National Security Council (SNSC), the crypto market is already reacting. This follows the huge significance of this channel that lies between Iran and Oman.

JUST IN: 🇮🇷 Iranian parliament approves closure of Hormuz Strait, blocking access to oil routes. pic.twitter.com/YvOCXuTEhy

— BRICS News (@BRICSinfo) June 22, 2025

The strait channels nearly 25% of all global oil shipments, and any disruption could cause a seismic shock to global energy markets. If Iran shuts down this channel, oil prices will go up. This would stoke inflation across different nations making central banks delay rate cuts. 

On the other hand, an increase in energy prices would spread across economies forcing  consumers to deal with higher fuel costs. Additionally, businesses will have to contend with the increased cost of transport and production. If this occurs, investors will rush to safe-havens such as US Treasuries and the dollar, pulling capital out of risk assets like cryptocurrencies.

As the war between Iran and Israel is growing at a very intense rate, the possibility of a wider regional conflict develops. The world markets are now centered on energy security as traders anticipate inflationary spillovers and a probable disintegration of supply chains. 

Bitcoin Sinks to $98K while Altcoins Follow Through

In the wake of the news, Bitcoin has experienced a sudden drop to a current value of $98,883 as per CoinMarketCap. This means BTC has lost the important psychological support at $100K, a move that has sent leveraged traders into full panic.

Ethereum, on the other hand, has slipped by more than 4% to $2,180. XRP has also plummeted below $2 for the first time in two months. In general, over $1.01 billion of positions were liquidated as a general panic took hold of the market. 

Most of the recent liquidations were on Bitcoin and Ethereum futures, where a chain of market volatility triggered margin calls across the crypto market. This is as a result of the possible increase in oil prices fanning the flames of inflation expectations, creating a high level of possibility for a Federal Reserve tightening.