The effects of the war in the Middle East could spill over to the crypto markets and cause a short-term decline in riskier assets such as bitcoin (BTC), several traders who spoke to CoinDesk opined.

The conflict extended to its fourth day on Tuesday following Hamas' surprise weekend attack into southern Israeli towns. The war's death toll has neared 1,600 on both sides, according to the Associated Press.

“The global market worries that the conflict will spread to nearby oil-producing countries so investors are still relatively sensitive,” said Greta Yuan, head of research at digital assets platform VDX, in an email to CoinDesk. “As the geopolitics of the Middle East worsened over the weekend and market risk-averse sentiment increased, as a result, spot gold rose by nearly 1%.”

Crypto markets had earlier slumped 2% on Monday as traders priced in rising oil prices and a drop in traditional equities as the turmoil could impact international trade.

Futures traders betting on higher prices saw over $100 million in liquidations over a 24-hour period from Monday, as alternative currencies saw a sell-off. However, crypto markets are showing signs of early resilience that may instill confidence among bulls.

“Currently, we've observed a temporary dip in Bitcoin's price following the shocking news of the conflict, but the price has already stabilized,” noted Jeff Mei, chief operating officer of crypto exchange BTSE. “Crypto assets have shown resilience in the face of rising geopolitical turmoil in the past.”

“For instance, when the U.S. imposed sanctions following Russia's invasion of Ukraine, we saw a sharp rebound in Bitcoin and the broader crypto market - that was in March last year,” Mei added.

In early 2022, military tensions between Russia and Ukraine saw bitcoin shed as much as 7% in a single day, displaying the significance and impact of geopolitical struggles on the niche asset class. At such times, typically, investors tend to flee to gold, while assets deemed riskier tend to see declines.

Meanwhile, some traders say investors should keep an eye out for oil and energy market changes for now to gain a sense of where bitcoin may be headed.

“Regarding macroeconomic implications, should the risks of expansion and conflict escalation materialize, we must keep an eye on energy prices again,” said Alex Kuptsikevich, FxPro senior market analyst, in a message to CoinDesk. “Rising oil prices are triggering a wave of sell-off in equities, fuelling expectations of tighter monetary policy. And that's the most considerable risk to assets like Bitcoin and the crypto market as a whole.”

“However, if we see a quick return to some form of normalcy, that would be a positive for cryptocurrencies. But for now, that looks like a less likely scenario,” Kuptsikevich said, adding that, for now, the chances of appetite for equities and cryptocurrencies to shrink was higher compared to the past weeks.