Ethereum falls 6% as Middle East tensions escalate

Most cryptocurrencies declined on Wednesday as tensions intensified in the Middle East and investors awaited key US economic data that could strengthen expectations of a Federal Reserve rate hike rather than a rate cut, amid inflationary pressures linked to the ongoing conflict.

As of 21:33 GMT, Ethereum was down 5.9% on CoinMarketCap, trading at $1,801.4.

Middle East developments

Iran launched ballistic missiles toward neighboring countries in the region, including Kuwait and Bahrain, resulting in one death and dozens of injuries, according to Kuwaiti authorities and state media. Meanwhile, US forces carried out strikes on Iran’s Qeshm Island.

Bob Yawger, director of energy futures at Mizuho, said the prospects for a ceasefire appear to be fading, adding that the current trajectory points toward further deterioration.

US President Donald Trump stated that negotiations are still ongoing. However, Iran’s semi-official Tasnim News Agency reported on Wednesday that Tehran has not responded to the United States in recent days and that indirect communications through mediators have been suspended until Iran’s conditions regarding a halt to fighting in Lebanon are met.

Israel continues its largest military incursion into Lebanon in 25 years, in a conflict that has been ongoing since March 2, when Hezbollah opened fire in support of Iran.

In a podcast interview published Wednesday, Trump said Iran had agreed not to possess nuclear weapons and that Supreme Leader Ayatollah Mojtaba Khamenei is participating in the negotiations.

The Fed and inflation

Federal Reserve Chair Kevin Warsh pledged on Tuesday to follow the “best traditions of the Federal Reserve” in his opening remarks at the start of his four-year term, while also promising a comprehensive review of potential reforms going forward.

Meanwhile, Cleveland Fed President Beth Hammack said the US central bank may soon need to raise interest rates if already elevated inflationary pressures continue to intensify.

Markets are also focused on Friday’s US nonfarm payrolls report for May, which could provide further clues about the future direction of Federal Reserve monetary policy.

The ADP National Employment Report showed that US private-sector employment increased by more than expected in May.