The crypto market cap fell below the $2.5 trillion mark on Monday after the U.S. officially moved to impose a maritime blockade on Iranian traffic through the strategic Strait of Hormuz.

According to recent reports, the U.S. Central Command confirmed through a Navy official that it had begun a blockade of all maritime traffic entering and exiting Iranian ports starting at 10 a.m. ET today.

As noted by the U.S. President in a recent Truth Social post, the U.S. Navy would seek and interdict any vessel in international waters that has paid a transit toll to Iran in the Strait of Hormuz. According to the administration, such payments are characterized as world extortion.

Along with the blockade, the U.S. Navy has deployed destroyers to the Strait to begin clearing naval mines allegedly laid by Iran to ensure a safe pathway for non-Iranian commercial traffic.

It should be noted that, unlike a total closure, the U.S. stated it would still permit freedom of navigation for vessels traveling strictly between non-Iranian ports. Hence, the move is an effective attempt to isolate Iran economically while keeping global energy lanes open for allies.

This escalation follows after diplomatic efforts to resolve ongoing tensions failed in Islamabad last week. These talks collapsed specifically over the Iranian government’s persistence in sticking to its long-term nuclear program.

Shortly following the recent report, oil prices spiked back above $100 on fears that rising energy costs and renewed inflation could hurt the global economy. West Texas Intermediate crude oil rose over 8% to $104.6, while Brent crude climbed back to $102.7.

The downturn was not confined to the crypto market alone. Notably, even traditional safe-haven assets such as gold and silver fell slightly on the day as investors scrambled for liquidity, while Asian indices such as Japan’s Nikkei 225 and the Hang Seng closed significantly lower at the end of their sessions.

Will the crypto market face more losses?

The crypto market will likely continue to struggle from escalating tensions between the U.S. and Iran, especially as the situation in the Strait of Hormuz remains volatile.

With a shaky so-called ceasefire between the two nations further strained by Iran’s defiance, risk on assets such as cryptocurrencies could continue to lose their appeal to investors as they pivot towards safer alternatives such as U.S. bonds and gold as a defensive hedge.

Against this backdrop, the U.S. PPI is set to be released tomorrow, Tuesday, at 8:30 a.m. ET. The market estimates the headline producer price index to rise by 1.2% on a monthly basis.

A stronger-than-expected PPI reading can embolden the Fed to maintain high interest rates for longer and hence place further downward pressure on crypto prices, while any sign of cooling could provide some much-needed relief to the struggling crypto sector.

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