The Strait of Hormuz impact may extend beyond oil and could shake the US Treasury market.

While everyone focuses on the conflict and rising oil prices, a more intriguing story may be unfolding within the financial system.

According to Goldman Sachs' assessment, if the conflict in the Strait of Hormuz persists, Qatar and Kuwait's GDP could decline by approximately 14%. The impact on Saudi Arabia and the UAE would be smaller but equally significant, affecting about 3%-5% of their GDP.

At first glance, this appears to be merely a regional issue.

But there's a critical point not to overlook.

Gulf states are not just major oil exporters.
They're also major holders of dollar-denominated assets:
holding substantial amounts of US Treasury bonds, equities, and other financial instruments.

Now, let's trace the chain of events.

If the oil shock and logistics problems severely damage the region's economy, these countries face a choice:

1. Cut government spending, but this could trigger internal turmoil
2. Sell financial assets to raise dollars

From historical experience, governments almost always choose the latter.

This means the US Treasury market could face additional selling pressure.

What does this mean for markets?

If major external holders begin selling US Treasuries (UST):

— Bond prices will fall
— Yields will rise
— The financial conditions across the entire economy will tighten accordingly

There's another critical point here.

If simultaneously:

— Oil prices rise
— Inflation expectations heat up
— Bond markets come under pressure

Then the Federal Reserve faces a very awkward dilemma.

Cutting rates at a moment when commodities are driving inflation shocks is highly risky—it could actually strengthen inflation expectations and intensify bond market stress.

Therefore, the most likely scenario in this situation is: the Fed remains on the sidelines, allowing the market to tighten itself through rising yields.

This is why the current situation in the Strait of Hormuz may be important beyond just the oil market.

It could affect something more fundamental—the cost of capital in the global system.

If this transmission mechanism truly activates, its impact will ripple through:

— Bond markets
— Stock markets
— The US dollar
— And of course, cryptocurrency markets.

Want us to dig deeper and map out this chain?
Let's explore how Hormuz → Oil → Yields → Federal Reserve → BTC are actually linked.

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