Most cryptocurrencies declined during Thursday’s trading as risk appetite weakened amid the escalating impact of the war and military operations between the United States and Iran, particularly on global energy supplies.

Two tankers reportedly caught fire in Iraqi waters in a clear escalation of Iranian attacks that have disrupted energy supplies in the Middle East, pushing oil prices sharply higher during the day.

Iran’s new Supreme Leader, Ayatollah Mojtaba Khamenei, renewed threats of retaliation for what he described as the “blood of martyrs,” while confirming that the Strait of Hormuz would remain closed and that attacks on US bases would continue.

As oil prices rose above $100 per barrel due to the Iran war, the closure of the Strait of Hormuz, and supply disruptions, concerns have increased that inflation could rise significantly in the United States, raising the possibility of a 1970s-style stagflation scenario.

US Energy Secretary Chris Wright told CNBC that the US Navy is “not ready” at this time to escort oil tankers through the Strait of Hormuz, while also ruling out the possibility of oil prices rising to $200 per barrel.

Government data released today showed that initial US jobless claims fell slightly to 213,000 last week, compared with expectations that they would remain unchanged at 214,000.

Investors are now pricing in only one Federal Reserve interest rate cut of 25 basis points this year, compared with expectations of two cuts before the Middle East conflict erupted.

In trading, Ripple fell 1.2% to $1.37 as of 20:46 GMT on the CoinMarketCap platform.

The semiconductor sector is facing growing pressure, threatening the global economy as a whole. The industry that produces the computer chips powering the digital world requires vast resources to operate efficiently, including critical minerals and large amounts of energy. With the war being waged by the United States and Israel in Iran, these supply chains are facing significant disruptions.

Although former US President Donald Trump said on Monday that the war would end “very soon,” concerns remain that the conflict and its repercussions could be long-lasting. Such a scenario could prove catastrophic for a wide range of global supply chains, in addition to the mounting human and environmental costs already emerging.

Computer chips are now an indispensable component of the global digital economy. As Duke University’s Deep Tech blog noted, semiconductors have “reshaped the digital era and are embedded in everything from satellites and smartphones to medical devices and electric vehicles.” Any disruption to their availability or increase in their cost could therefore have major consequences for producers and consumers worldwide.

Ray Wang, a memory analyst at SemiAnalysis, told CNBC: “A prolonged regional conflict could disrupt chip manufacturing by affecting access to materials such as helium and bromine. For now the impact appears limited, but if the conflict continues companies may need to reorganize their sourcing of these critical materials.”

The Middle East’s importance despite the focus on Taiwan

While more than 90% of advanced chips are produced in Taiwan, the Middle East remains central to supply chains. Qatar, for example, produces more than one-third of the world’s helium, a key element used in semiconductor cooling systems and circuit printing. Any major disruption to global helium supply—whether due to production or transportation issues—cannot easily be replaced with alternative materials.

The semiconductor industry was already facing major challenges due to the concentration of production in Taiwan, which itself faces energy security concerns and relies heavily on external imports, in addition to ongoing tensions with China. With global oil supplies now disrupted by the war in Iran, these risks could intensify and affect Taiwan’s vital energy supply, with broader consequences for the global economy.

Direct impact on South Korean chipmakers and the expansion of artificial intelligence

Semiconductor manufacturers in South Korea are facing an even greater shock than their counterparts in Taiwan, as they are the main producers of memory chips, which have seen rapidly rising demand due to the expansion of artificial intelligence.

If the prices of these chips rise significantly, AI activity could slow as costs become too high.

Jingjie Yu, an equity analyst at Morningstar, said: “This could significantly increase the total cost of ownership for hyperscalers, threatening the adoption of AI infrastructure. A prolonged war could lead to a decline in demand for memory chips used in AI.”

A new threat to digital infrastructure

The conflict has taken a dangerous turn for the technology sector after Iran’s Revolutionary Guard–affiliated Tasnim news agency published a list of “new targets” this week. The list reportedly included regional offices, cloud infrastructure, and data centers linked to companies such as Google, Amazon, Microsoft, Nvidia, IBM, Oracle, and Palantir.

The threats have not remained merely theoretical. Iranian drones reportedly targeted three AWS data centers in the United Arab Emirates and Bahrain, marking the first military attacks on US cloud service providers and causing fires, power outages, and disruptions to payment and banking services. AWS advised clients to shift computing workloads entirely outside the Middle East.

Direct economic consequences

Nvidia temporarily closed its offices in Dubai following the attacks, Amazon shut its regional offices, and Google employees in Dubai were stranded after flight cancellations.

Meanwhile, Samsung and SK Hynix have reportedly lost more than $200 billion in market value since the start of the war. South Korea’s Ministry of Industry also warned that the semiconductor supply chain depends on at least 14 inputs from the Middle East, in addition to helium.

Patrick Murphy, executive director of the geopolitics unit at Hilco Global, said: “Iran used to target oil fields, but its recent attacks on data centers in the UAE show that it now considers digital infrastructure a strategic target.”

Aluminum prices climbed on Thursday to their highest levels in nearly four years as concerns intensified over potential supply constraints to Europe and other regions due to shipping disruptions through the Strait of Hormuz amid the Middle East conflict.

The three-month aluminum contract on the London Metal Exchange rose 0.6% to $3,478.50 per metric ton after touching $3,546.5, its highest level since around March 2022.

Shipments from aluminum producers in the region—who account for roughly 9% of global supply—have been affected, raising fears that raw materials such as alumina could also face disruptions as they pass through the strait to reach these producers.

In an effort to ease some immediate concerns, Norsk Hydro announced that the Qatalum aluminum smelter in Qatar would end the curtailment that began last week and continue operating at about 60% of its production capacity despite reduced gas supplies. The company added that it is working to mitigate the effects of the curtailment and shipping disruptions.

Rising oil prices are another major concern for aluminum producers, as energy can account for 40% to 45% of aluminum smelting costs in some regions. The International Energy Agency confirmed that the Middle East war is causing the largest disruption to oil supplies in history.

Alastair Munro, senior base metals strategist at Marex, said current volatility in aluminum prices is being amplified by a short-gamma market structure in options trading, where market makers sell when prices fall and buy when they rise, increasing intraday swings.

Among other metals on the London Metal Exchange, copper slipped 0.1% to $13,032 per ton, zinc was steady at $3,310.50, lead rose 0.4% to $1,943.50, tin gained 0.8% to $49,320, and nickel edged up 0.1% to $17,710.

Bitcoin fell below the $70,000 level on Thursday but remained relatively supported as investors turned cautious following another surge in oil prices amid the escalating conflict in the Middle East.

The world’s largest cryptocurrency declined 0.7% to trade around $69,454 as of 02:14 a.m. New York time, with Bitcoin appearing to move within a narrow range around the $70,000 level while markets assess geopolitical developments.

Oil approaches $100 again, raising inflation concerns

Oil markets have been the main driver of risk appetite across financial markets. Brent crude climbed back above $100 per barrel after retreating from a peak near $120 reached on Monday, its highest level in about two years.

The latest escalation in the Middle East followed reports of attacks on two fuel tankers in Iraqi territorial waters, along with strikes targeting commercial vessels passing through the Strait of Hormuz, one of the world’s most important oil shipping routes.

About one-fifth of global oil supplies pass through the strait, while tanker traffic there has dropped significantly due to security concerns.

Rising energy prices have revived fears of global inflation at a time when central banks were preparing to consider easing monetary policy. Analysts believe that if oil prices remain above $100 for an extended period, it could complicate the Federal Reserve’s path toward rate cuts and put pressure on risk-sensitive assets such as cryptocurrencies.

In recent months, Bitcoin has often moved in tandem with risk assets, as traders worry that a new inflation shock could reduce liquidity across financial markets.

Investors are also awaiting important US economic data that could provide signals about the future path of monetary policy, including weekly jobless claims due later on Thursday and the Personal Consumption Expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — scheduled for release on Friday.

Limited moves in other cryptocurrencies

In the broader crypto market, most alternative coins moved only slightly amid the risk-off environment.

Ethereum, the world’s second-largest cryptocurrency, rose 0.2% to $2,027.84, while Ripple, the third-largest digital currency, fell about 1% to $1.37.