- Hayes links prolonged Iran conflict to higher odds of Fed rate cuts and liquidity support.
- Past Middle East wars show Fed easing followed by rising uncertainty and oil shocks.
- Bitcoin could see upside if the Fed returns to monetary easing policies.
Arthur Hayes addressed how the prolonged U.S. conflict with Iran could increase the likelihood of Federal Reserve policy easing, a shift he believes may support Bitcoin prices. In a recent commentary, Hayes argued that major U.S. military engagements in the Middle East have historically coincided with looser monetary policy, particularly when economic uncertainty and rising oil prices weighed on growth.
Hayes examined prior conflicts dating back to 1985, pointing to periods when the Federal Reserve reduced interest rates following geopolitical escalations. He cited Federal Open Market Committee (FOMC) statements to support his view that war-related uncertainty has previously influenced monetary decisions.
Historical Fed Responses to Middle East Conflicts
During the 1990 Gulf War under President George H.W. Bush, the Federal Reserve initially held rates steady. However, FOMC statements from August 1990 acknowledged that heightened uncertainty tied to events in the Middle East complicated monetary policy. By November and December of that year, the Fed cut rates, referencing weakened business and consumer confidence.
Following the September 11, 2001, attacks and the launch of the Global War on Terror under President George W. Bush, the Fed moved quickly to ease policy. Then-Chair Alan Greenspan proposed a 50-basis-point emergency rate cut, citing increased fear, uncertainty, and downward pressure on asset prices.
In 2008 and 2009, during President Barack Obama’s troop surge in Afghanistan, interest rates were already near zero as part of broader monetary stimulus measures. Quantitative easing programs were underway, limiting the need for additional rate reductions tied specifically to military developments.
Iran Tensions and Bitcoin Outlook
Hayes suggested that if President Donald Trump pursues extended military engagement with Iran, the monetary burden could rise. He stated that higher government spending, combined with geopolitical risk, may create conditions for monetary easing similar to past conflicts.
He said investors should monitor rate decisions and liquidity measures, arguing that Bitcoin has historically benefited from periods of lower interest rates and increased money supply.
Related: $100M Liquidated as Crypto Crashes Amid Middle East War
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