According to Georgieva, if oil prices rise by 10 percent and remain elevated for most of the year, global headline inflation could increase by roughly 40 basis points. This relationship illustrates how closely energy markets are tied to overall price stability across the global economy.

The warning comes at a time when geopolitical tensions in the Middle East are intensifying, raising concerns about supply disruptions and the stability of critical energy routes.

Middle East Tensions Threaten Energy Supply

Recent conflicts in the region have begun to affect energy infrastructure directly. Reports indicate that several important oil and gas facilities have suffered damage, while some operations have experienced temporary shutdowns. These developments have heightened fears about supply interruptions in global energy markets.

At the same time, maritime traffic through the Strait of Hormuz—a vital corridor for global energy shipments—has reportedly dropped by around 90 percent. Any disruption to shipping activity in this area has the potential to impact global energy distribution, making it a significant concern for policymakers and markets alike.

The Strategic Importance of the Strait of Hormuz for Oil

The Strait of Hormuz plays a crucial role in global energy trade. Under normal conditions, roughly one fifth of the world’s oil supply and a substantial portion of global liquefied natural gas shipments pass through this narrow maritime route.

For many Asian economies, the strait represents a particularly critical supply line. Nearly half of Asia’s oil imports travel through this corridor, along with about one quarter of its LNG imports. Japan’s dependence is even more pronounced, with nearly 60 percent of its oil imports and around 11 percent of LNG imports relying on this route.

Because of this concentration of energy flows, disruptions in the region can quickly affect global market sentiment and price stability.

Sharp Surge in Oil Prices

Energy market tensions have already had a visible impact on prices. Oil recently climbed by 16.10 percent in a single day, reaching approximately $108.51 per barrel. Over a broader time frame, the increase has been even more dramatic, with prices rising about 61.74 percent on a monthly basis.

Such rapid price movements often trigger concerns about inflationary pressure and economic slowdown, particularly in energy-dependent economies.

Potential Impact on Global Growth

Higher energy costs do not only affect inflation—they can also influence economic growth. Economic estimates suggest that a sustained 10 percent rise in oil prices could reduce global output by approximately 0.1 to 0.2 percent.

For policymakers and central banks, these developments create a challenging environment. As energy prices fluctuate and geopolitical risks intensify, governments may need to prepare for unexpected scenarios and adapt economic strategies accordingly. Monitoring energy markets will likely remain a key priority in the months ahead.

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Shawn Young, chief analyst at MEXC Research, attributes this cautious stance to volatility, regulatory uncertainty, and structural conservatism. “Central banks prioritize stability and liquidity — and Bitcoin, despite its resilience, still doesn’t consistently offer these qualities,” he said.

Shift Away from Traditional Bonds

The survey also highlights a growing appetite for diversification. While gold remains the dominant reserve asset, central banks are increasingly eyeing corporate bonds and public equities for the next 10 years. About 16% expect to reduce their government bond holdings, and 13% plan to cut cash reserves.

Meanwhile, digital assets are slowly gaining ground. Around 10% of participants said they might increase exposure to digital assets, though the focus is primarily on tokenized securities rather than mainstream cryptocurrencies.

Governments Are Holding Bitcoin?

According to Chainalysis, some governments have started to accumulate significant amounts of cryptocurrency, mainly from law enforcement seizures. Unlike in the past, these assets are now being strategically held instead of immediately liquidated. The United States is among the countries shifting toward this approach.

In China, approximately $50 billion worth of seized crypto is held, although the lack of a centralized management policy raises concerns about transparency and long-term value. Analysts believe that a unified national strategy could reshape China’s stance on digital assets.

Early Bitcoin Adopters: El Salvador and Bhutan

El Salvador made global headlines in 2021 when it became the first country to adopt Bitcoin as legal tender. While the move attracted investment and attention, it also triggered political friction, particularly with the IMF, leading the country to soften some of its policies. Young notes that El Salvador’s goal was to attract investment, tourism, and tech infrastructure.

Shifting Sentiment in Europe

In a bold departure from traditional European monetary policy, Czech National Bank Governor Aleš Michl proposed allocating 5% of the country’s reserves to Bitcoin. This view contrasts with the European Central Bank, where President Christine Lagarde continues to reject Bitcoin as a viable reserve asset due to concerns over liquidity, security, and AML compliance.

Switzerland presents a unique case: a 2024 People’s Initiative aims to amend the constitution, requiring the Swiss National Bank to hold Bitcoin alongside gold. If successful, it could lead to the world’s first national referendum on Bitcoin as a reserve asset — showcasing rising public and institutional acceptance of digital assets in a country known for financial privacy.

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Announced last week, the initiative aims to attract independent miners, blockchain companies, and firms operating in the artificial intelligence sector. However, the IMF has demanded an urgent explanation from Pakistan’s Ministry of Finance regarding the legal framework of this decision and the electricity allocation. Given the country’s long-standing energy shortages and financial pressures, the timing of the plan has drawn criticism.

According to local sources, the IMF was not informed about the plan in advance and is questioning the legal status of crypto assets in Pakistan. There are also concerns about the possible effects on electricity tariffs and the distribution of energy resources.

An official involved in the ongoing talks said, “The IMF is expected to take a tougher stance on this matter. The economic team is already facing difficult questions, and this decision has only added more complexity to the talks.”

IMF Plans Special Session on Crypto Mining

Currently holding virtual meetings with Pakistani officials, the IMF delegation is planning a separate session to address the government’s energy allocation for Bitcoin mining.

The electricity allocation is part of Pakistan’s broader strategy to integrate digital assets into the national economy. One of the key elements of this strategy is the newly established Pakistan Digital Asset Authority (PDAA), approved by the Ministry of Finance on May 21.

The PDAA will regulate exchanges, wallets, stablecoin projects, and decentralized finance (DeFi) platforms. It will also oversee the tokenization of national assets in accordance with international standards, such as those set by the Financial Action Task Force (FATF).

This development follows Pakistan’s unveiling of its first strategic Bitcoin reserve at the Bitcoin Vegas 2025 conference held last week. The move is seen as a clear signal of Islamabad’s shift toward digital finance.

At the conference, Bilal bin Saqib, crypto adviser to Prime Minister Shehbaz Sharif, announced the launch of a national Bitcoin wallet and reiterated the government’s commitment to supporting the digital asset sector.

Pakistan Enters a New Phase in Crypto Policy

The Pakistani government began significantly shifting its stance on cryptocurrencies at the beginning of 2025. In February, the proposed “National Crypto Council” was tasked with preparing a comprehensive regulatory framework for digital assets.

Among the Council’s early proposals were plans to utilize the country’s surplus energy for Bitcoin mining and data centers, along with the establishment of a national Bitcoin reserve.

In April, Changpeng Zhao, co-founder of Binance, was appointed as an adviser to the Council. In this role, Zhao is expected to provide support in areas such as crypto regulation, blockchain infrastructure, and the expansion of digital assets.

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This acquisition comes despite a $1.4 billion IMF deal signed in December 2024, which included stipulations that El Salvador stop using public funds to purchase Bitcoin. However, the government appears unfazed by the agreement’s conditions.

President Bukele Pushes Back Against IMF

In January 2025, El Salvador’s Congress repealed the Bitcoin legal tender law, but the country’s Bitcoin acquisitions did not slow. In March, the IMF reiterated its demand to stop BTC purchases. President Nayib Bukele strongly opposed the request:

“No, it’s not stopping. If it didn’t stop when the world ostracized us and most ‘Bitcoiners’ abandoned us, it won’t stop now, and it won’t stop in the future,” Bukele declared on X.

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A Blueprint for Future Bitcoin Nations

El Salvador is currently the only country buying Bitcoin in open markets, setting an example that crypto leaders believe could inspire other nations to follow suit. The country’s strategy combines financial independence with technological innovation to support long-term economic growth.

El Salvador remains at the forefront of global Bitcoin adoption, pursuing a path of sovereignty in the digital age.

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During a meeting with South Korean Finance Minister Choi Sang-mok and Trade Minister Ahn Duk-geun, Bessent discussed finding a new equilibrium on tariffs to encourage rather than restrict trade. The Treasury emphasized that talks focused on creating an “expanded equilibrium” to boost trade between the allies.

India Close To Securing Trade Deal With US

Meanwhile, Scott Bessent said India could be among the first countries to finalize a new trade deal with the U.S., avoiding President Trump’s suite of “reciprocal” tariffs. Speaking at the World Bank and IMF Spring Meetings, Bessent noted that India’s lower tariffs and minimal trade barriers made negotiations easier.

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U.S. Vice President JD Vance and Indian Prime Minister Narendra Modi announced a roadmap on Tuesday to advance trade talks, with a 26% tariff potentially coming into effect in July if no deal is reached.

Talks With China Stalled

Bessent also revealed that trade talks with China have stalled. With tariff rates on Chinese imports exceeding 145%, Bessent emphasized that both sides see these levels as unsustainable. However, he insisted that the U.S. would not unilaterally reduce duties.

Bessent added that the U.S. is continuing negotiations with 15 major trading partners aside from China, including Japan, South Korea, Vietnam, and the United Kingdom.

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The El Salvador Treasury acquired 7 Bitcoin (BTC) worth over 650,000$ in the seven days leading up to April 27, according to blockchain data shared by the country’s Bitcoin Office.

Rodrigo Valdes, Director of the IMF’s Western Hemisphere Department, confirmed during an April 26 press briefing that El Salvador is still complying with the agreement prohibiting Bitcoin accumulation by the government sector. “The El Salvador program is not just about Bitcoin, it involves deeper structural reforms, governance improvements, and enhanced transparency,” Valdes said.

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In December 2024, El Salvador signed a deal with the IMF for a 1.4 billion dollar loan, which required the government to drop Bitcoin’s legal tender status and halt additional BTC purchases.

Flexible Interpretation Leaves Room for Bitcoin Buys

Intergovernmental blockchain advisor and author Anndy Lian explained that the IMF deal might allow non-governmental entities to continue acquiring Bitcoin. “The flexible interpretation allows Bitcoin purchases through non-public sector assets or reclassified investments,” Lian said.

This strategy enables El Salvador to maintain its Bitcoin-friendly image while meeting IMF funding requirements. Lian also emphasized that El Salvador’s experience offers critical lessons for other nations considering crypto adoption.

El Salvador’s case highlights the tension between financial innovation and traditional economic frameworks, underlining the importance of strong regulatory frameworks and robust state capacity to withstand international financial pressures.

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According to the Wall Street Journal, tariffs could drop from 145% to between 50% and 65%, though no official confirmation was given. White House spokesperson Kush Desai called such reports “pure speculation” unless directly announced by Trump.

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President Donald Trump said, “We’re going to have a fair deal with China,” and added that a final decision on tariffs would come within 2-3 weeks.

Global Implications

Treasury Secretary Scott Bessent stated that both countries consider the current tariff levels unsustainable, although no timeline for formal negotiations has been set.

Markets responded positively to the news, with the S&P 500 rising nearly 3%, fueled by Trump’s softened stance on the Fed and hints at a China deal.

The IMF warned, however, that such tariffs would slow economic growth and raise global debt levels.

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Geopolitical Uncertainty Threatens the Financial System

In its report, the IMF emphasized that increasing geopolitical tensions threaten financial stability and create significant uncertainty in the markets. The report stated:

“The rise in geopolitical risks increases the likelihood of new tensions and their potential impacts on macro-financial stability.”

The sharp declines in global stock markets have particularly affected major investment institutions such as hedge funds and pension funds. The IMF noted that such severe fluctuations have triggered margin calls, where banks demand more collateral from investors.

Indeed, earlier this month, hedge funds received the largest margin calls since the pandemic. The reason was the sharp drops in stock prices following new tariff announcements from the Trump administration.

The Cost of Trade Wars and Complacency: Market Crisis

The IMF warned that investors’ inability to accurately price geopolitical developments could lead to severe market reactions, potentially resulting in widespread financial turmoil. Events such as Trump’s trade war against China and Russia’s invasion of Ukraine were highlighted as past examples of this risk.

Trade Tensions Between the US and China Are Escalating

During his second presidential term, Trump resorted to the highest customs tariffs in history as part of his trade policy. The reciprocal taxes applied between the US and China now exceed 100%. This means every imported product costs twice as much.

IMF Managing Director Kristalina Georgieva stated following Trump’s so-called “liberation day” that such tariffs represent a serious threat to the global economy.

IMF: Markets Are Not Ready for a Crisis

The report stressed that geopolitical risks are still not being adequately considered by investors. According to the IMF, the failure to fully price in these risks could lead to sudden and prolonged corrections, creating instability in the markets.

In summary, the analysis published by the IMF reveals that Trump’s trade wars threaten not only the economy but also financial security. With rising tariffs, sharp market reactions, and increased investor uncertainty, the IMF warns that a global financial storm may be looming.

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Some market analysts, however, believe this move could be bullish for Bitcoin in the long run. Here are four reasons why experts see this decision as a positive signal:

1. The Risk of a Bitcoin Ban Decreases

Bitwise Chief Investment Officer Matt Hougan stated that the creation of a U.S. Strategic Bitcoin Reserve significantly reduces the likelihood that the government will ever ban Bitcoin. Previously, the Federal Reserve Bank of Minneapolis suggested that Bitcoin could force the federal government to balance its budget, which could lead to regulatory restrictions. However, this scenario now seems far less likely.

2. Other Countries May Follow the U.S.’s Lead

The U.S. government’s move may encourage other nations to establish their own Bitcoin reserves. According to BitBO data, the U.S. currently holds 207,189 BTC, making it the largest state-held Bitcoin reserve. China follows with 194,000 BTC, while the United Kingdom holds 61,000 BTC. El Salvador, the only country that has made Bitcoin legal tender, has accumulated 6,103 BTC so far. Coinbase CEO Brian Armstrong suggested that this decision could influence G20 nations to adopt similar strategies.

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3. Bitcoin Becomes More Legitimate for Institutional Investors

The establishment of a U.S. Bitcoin reserve makes it more difficult for institutions like the International Monetary Fund (IMF) to label Bitcoin as dangerous or inappropriate for holding. The IMF has previously opposed Bitcoin investments by sovereign nations, pressuring El Salvador to halt its Bitcoin accumulation in exchange for a $1.4 billion financial aid package. However, the U.S. backing Bitcoin could weaken the IMF’s stance and encourage institutional adoption.

4. Fears of a U.S. Bitcoin Sell-Off Diminish

Bitwise Head of Research Ryan Rasmussen outlined key takeaways from the U.S. Bitcoin Reserve announcement:

• Other countries are now more likely to accumulate Bitcoin.
• Institutional investors have no excuse to avoid Bitcoin.
• The fear of a U.S. Bitcoin sell-off is now gone.
• The likelihood of state governments buying Bitcoin has increased.
• The probability of the U.S. government banning Bitcoin is now effectively zero.

Crypto lawyer John Deaton pointed out that Treasury Secretary Scott Bessent and Secretary of Commerce Howard Lutnick have been instructed to find “budget-neutral” ways to acquire more Bitcoin. ETF Store President Nate Geraci added, “Two years ago, people would have laughed at the idea of the U.S. government creating a Bitcoin reserve.”

Despite an initial drop, Bitcoin (BTC) quickly rebounded and reached $88,200 at the time of writing.

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On March 3, the IMF issued a request as part of its $1.4 billion funding program, urging El Salvador’s public sector to stop accumulating Bitcoin. However, Bukele firmly rejected the demand, stating on March 4:

“No, it’s not stopping. If it didn’t stop when the world ostracized us and most ‘Bitcoiners’ abandoned us, it won’t stop now, and it won’t stop in the future.”

IMF’s Demands and El Salvador’s Response

In addition to stopping Bitcoin purchases, the IMF memorandum also called for El Salvador to halt Bitcoin mining operations and refrain from issuing debt or tokenized instruments linked to Bitcoin.

While Bukele made it clear that Bitcoin accumulation will continue, it remains uncertain whether the country will comply with other IMF demands.

El Salvador’s National Bitcoin Office has not yet commented on the IMF’s latest request.

El Salvador’s Bitcoin Strategy and Holdings

Since becoming the first country to adopt Bitcoin as legal tender in 2021, El Salvador has consistently purchased Bitcoin as part of its national treasury strategy.

• The country currently holds 6,101 BTC, valued at approximately $534.5 million.
• El Salvador ranks as the sixth-largest Bitcoin-holding nation, behind the U.S., China, the U.K., Ukraine, and Bhutan.

However, in January 2024, Bitcoin’s legal tender status was narrowed, allowing private sector businesses to accept BTC payments voluntarily rather than mandatorily.

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