The U.S. dollar weakened this week amid ongoing geopolitical tensions and renewed uncertainty over U.S. trade policy. The setback followed a ruling by the Supreme Court of the United States declaring the Trump administration’s tariffs illegal, prompting President Donald Trump to announce a fresh round of levies. Even stronger-than-expected Producer Price Index (PPI) data failed to revive the greenback.
The U.S. Dollar Index (DXY) hovered near the 97.60 area, down about 0.20% on the day and ending the week modestly lower, as traders remained cautious amid trade and geopolitical uncertainty.
EUR/USD traded around 1.1810, edging higher during the U.S. session after Germany’s flash Harmonized Index of Consumer Prices (HICP) for February came in softer than expected at 2% year-on-year (vs. 2.1% forecast) and 0.4% month-on-month (vs. 0.5%). Investors also evaluated testimony from Christine Lagarde, President of the European Central Bank, before the European Parliament. Lagarde reiterated that inflation is gradually returning to the 2% target and said she intends to complete her term, dismissing speculation about an early departure.
GBP/USD hovered near 1.3470, rebounding after nearly revisiting a one-month low earlier in February. Meanwhile, Andrew Bailey, Governor of the Bank of England, indicated there is room for rate cuts as inflation is expected to move back toward the 2% target.
USD/JPY traded near 156.00, stabilizing after recouping most of its intraday losses. Tokyo’s February CPI rose 1.6% year-on-year, with the core measure excluding fresh food falling below the Bank of Japan’s 2% target for the first time since 2024.
AUD/USD climbed back toward 0.7120, turning positive after reversing earlier declines. Attention now shifts to Australia’s TD-MI Inflation Gauge, due Monday.
USD/CAD hovered around 1.3630, marking nearly a two-week low, as markets assessed economic data from both sides of the border. According to Statistics Canada, Canada’s GDP contracted at an annualized 0.6% rate in the fourth quarter, following a revised 2.4% expansion in Q3.
Gold traded near $5,260, reaching a one-month high amid persistent geopolitical uncertainty. The precious metal is attempting to retest its all-time high of $5,598 set earlier this year.
Anticipating economic perspectives: Key voices in focus
Sunday, March 1
Joachim Nagel – European Central Bank
Monday, March 2
Frank Elderson – European Central Bank
Joachim Nagel – European Central Bank
Christine Lagarde – European Central Bank
Dave Ramsden – Bank of England
Michele Bullock – Reserve Bank of Australia
Tuesday, March 3
Kazuo Ueda – Bank of Japan
John C. Williams – Federal Reserve
Olaf Sleijpen – European Central Bank
Martin Kocher – European Central Bank
Neel Kashkari – Federal Reserve
Wednesday, March 4
Piero Cipollone – European Central Bank
Tiff Macklem – Bank of Canada
Luis de Guindos – European Central Bank
Thursday, March 5
Luis de Guindos – European Central Bank
Martin Kocher – European Central Bank
Christine Lagarde – European Central Bank
Friday, March 6
Piero Cipollone – European Central Bank
Mary Daly – Federal Reserve
Beth Hammack – Federal Reserve
Scott Paulson – Federal Reserve
Central bank meetings and key data releases set to steer monetary policy outlook
Monday, March 2
Australia: TD-MI Inflation Gauge
China: February RatingDog Manufacturing PMI
Germany: January Retail Sales
Switzerland: January Real Retail Sales
Spain: February HCOB Manufacturing PMI
Italy: February HCOB Manufacturing PMI
Germany: February HCOB Manufacturing PMI
Canada: February S&P Global Manufacturing PMI
U.S.: February ISM Manufacturing Employment Index
U.S.: February ISM Manufacturing New Orders Index
U.S.: February ISM Manufacturing PMI
U.S.: February ISM Manufacturing Prices Paid
New Zealand: January Building Permits (s.a.)
Japan: January Unemployment Rate
Tuesday, March 3
Australia: January Building Permits
Eurozone: HICP (Harmonized Index of Consumer Prices)
The U.S. dollar steadied on Thursday, recovering from earlier declines after upbeat earnings from AI heavyweight Nvidia, as investors looked ahead to further clarity on upcoming U.S. tariff measures.
As of 03:00 ET (08:00 GMT), the US Dollar Index, which measures the greenback against six major peers, was up 0.1% at 97.650. Despite the modest rebound, the index remained on course for a weekly drop of roughly 0.2%.
Dollar Holds Steady Following Strong Results from Nvidia
The dollar steadied after starting the session under pressure, as stronger-than-expected earnings from Nvidia lifted investor sentiment and reduced demand for the traditional safe-haven currency.
The world’s most valuable company reported January-quarter revenue that topped analyst forecasts and projected current-quarter sales above market expectations, reinforcing optimism around the AI theme.
“Improved sentiment has weighed on the dollar over the past 24 hours, with only the yen faring worse among G10 currencies yesterday,” analysts at ING Group noted.
Markets are also watching how the Trump administration responds to the February 20 Supreme Court decision that invalidated the president’s emergency tariffs. Meanwhile, U.S. Trade Representative Jamieson Greer said Wednesday that tariff rates for certain countries will increase to 15% or more from the newly introduced 10%, though he did not specify which trading partners would be affected.
In addition, U.S. and Iranian officials are set to meet in Geneva to discuss a potential nuclear agreement, with Donald Trump warning that “bad things” could occur if meaningful progress is not made.
According to ING, any escalation in tensions could serve as the most credible trigger for a broader dollar rally, particularly given the supportive backdrop from Nvidia’s results and the absence of major economic data releases. Overall, while the dollar may find some near-term stability, downside risks persist as the positive spillover from Nvidia’s earnings keeps investors leaning away from defensive currencies for now.
Euro edges lower
In Europe, EUR/USD slipped 0.1% to 1.1798 ahead of the latest Eurozone consumer confidence data due later in the session.
Still, both these figures and Friday’s inflation release are unlikely to move the needle much for the single currency, as the European Central Bank is widely expected to leave interest rates unchanged for the foreseeable future.
“For now, the EUR/USD short-term rate differential remains unsupportive for the pair, but we haven’t seen a sufficient rebound in dollar confidence to call for a significant downside break. We continue to view 1.1750 as solid support, absent a major escalation involving Iran,” analysts at ING Group said.
Meanwhile, GBP/USD declined 0.3% to 1.3523, with sterling failing to gain traction despite improved sentiment data from the UK’s business and professional services sector.
The latest quarterly survey from the Confederation of British Industry showed optimism in the sector rebounded sharply to -3 in February from -50 in November — its strongest reading since August 2024.
Yen Strengthens Following Interview with Kazuo Ueda
In Asia, USD/JPY slipped 0.3% to 156.01 after Kazuo Ueda, governor of the Bank of Japan, told the Yomiuri Shimbun that policymakers will внимательно assess incoming data at their March and April meetings, keeping the door open to another rate hike if inflation and wage growth remain solid.
His comments bolstered expectations that Japan will stay on a gradual path toward policy normalization.
The yen had weakened the previous day following reports that Prime Minister Sanae Takaichi adopted a cautious stance on additional rate increases, alongside news that two dovish-leaning nominees were selected for the BOJ board.
Meanwhile, USD/CNY declined 0.4% to 6.8392, hitting a fresh 34-month low amid anticipation of supportive measures ahead of China’s annual legislative gathering, the National People’s Congress. Investors are looking for growth targets and potential fiscal stimulus signals from the meeting, which typically outlines Beijing’s economic agenda for the year.
Elsewhere, AUD/USD eased 0.1% to 0.7114, while NZD/USD fell 0.2% to 0.5988.
The U.S. dollar weakened on Monday as investors assessed the implications of the Supreme Court of the United States decision to strike down tariffs introduced by Donald Trump, along with the administration’s subsequent response.
Traders were also monitoring renewed nuclear negotiations between Washington and Tehran.
As of 14:12 ET (19:12 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — was down 0.2% at 97.65. The currency had posted a gain of roughly 1% last week, marking its strongest weekly advance in more than four months.
Dollar pressured by mounting trade uncertainty
The Supreme Court of the United States ruled on Friday that sweeping tariffs introduced by Donald Trump exceeded his authority. In response, Trump criticized the court and unveiled a blanket 15% levy on imports.
The new duties are set to remain in place for 150 days, but it remains unclear whether the U.S. government must reimburse importers for tariffs already collected, as the Court did not address that issue.
The uncertainty could trigger prolonged legal battles and further confusion as Trump explores alternative mechanisms to reinstate broad-based global tariffs on a more permanent footing.
Thierry Wizman, global FX and rates strategist at Macquarie, said the firm’s bearish U.S. dollar outlook for 2026 was based on the view that tariffs signal U.S. “disengagement” from the rules-based order underpinning free trade. He added that tariff conflicts themselves generate uncertainty centered on the United States — a negative for the dollar.
“In that sense, while the Supreme Court ruling may have strengthened institutional checks, it also heightens uncertainty, as Trump is likely to revive the tariff war through different — and more legally grounded — channels that have yet to be detailed. We see no reason to revise our broader expectation for a weaker USD in 2026,” Wizman said.
Beyond trade policy, investors are also watching a U.S. military buildup in the Middle East aimed at pressuring Iran to abandon its nuclear ambitions, with further talks between Washington and Tehran expected later this week.
Euro advances as confidence in Europe strengthens
In Europe, EUR/USD rose 0.2% to 1.1799, with the single currency drawing support from trade-driven weakness in the dollar.
Growing confidence in the region’s economic outlook also underpinned the euro, following data on Friday showing eurozone business activity expanded faster than expected this month, as manufacturing returned to growth for the first time since October.
Momentum was reinforced on Monday as Germany’s Ifo business climate index climbed to 88.6 from 87.6 the previous month, signaling improving sentiment in Europe’s largest economy.
Meanwhile, GBP/USD added 0.1% to 1.3497, with sterling firming ahead of key event risks this week — including testimony before the Treasury Committee by Andrew Bailey, governor of the Bank of England, and Thursday’s UK by-election in Gorton and Denton.
Yen edges higher
In Asia, USD/JPY fell 0.4% to 154.48, with the Japanese yen supported by its traditional safe-haven appeal as investors remained cautious about the economic impact of higher U.S. tariffs. Trading volumes were thinner due to a public holiday in Japan.
USD/CNY was little changed at 6.9087, with Chinese markets shut for New Year holidays. Elsewhere, AUD/USD declined 0.3% to 0.7060, while NZD/USD also dropped 0.3% to 0.5961.
Thierry Wizman of Macquarie said that while the dollar could remain under pressure amid persistent U.S.-driven uncertainty, some currencies — such as the yuan and the euro — may outperform, whereas others, including the Canadian and Mexican pesos, could lag. He added that even in the face of potential credit rating actions, long-term U.S. Treasury yields might rise due to uncertainty over revenue replacement, and equities could come under strain if higher yields lead to valuation compression.
Oil prices edged higher during Asian trade on Tuesday, remaining just under the seven-month peaks reached in the prior session, as markets looked ahead to upcoming U.S.–Iran discussions later this week. Ongoing uncertainty surrounding trade tariffs continued to temper investor sentiment.
At 22:22 ET (03:22 GMT), Brent crude futures climbed 0.8% to $72.04 per barrel, while U.S. West Texas Intermediate (WTI) crude futures also advanced 0.8% to $66.81 per barrel.
Both benchmarks had approached seven-month highs in the previous session before ending slightly lower.
Market participants are holding back ahead of US – Iran talks scheduled for later this week.
Markets stayed tense ahead of a third round of nuclear talks between Washington and Tehran set for Thursday in Geneva. Strains have persisted since last week amid indications that the situation could escalate. The U.S. pulled some non-essential embassy staff from Beirut, underscoring concerns that diplomacy might collapse and spark conflict.
President Donald Trump warned in a social media post on Monday that it would be a “very bad day” for Iran if no agreement is reached.
“In the event of a deal, we would likely see a significant unwinding of the risk premium currently built into prices — though securing such an agreement is far from straightforward,” analysts at ING noted.
A failure in negotiations could heighten worries about stricter sanctions enforcement or potential disruptions in the Strait of Hormuz, a crucial corridor for global crude shipments. Fears of a possible military clash contributed to a 6% surge in oil prices last week.
Tariff tensions under Donald Trump weigh on demand outlook
Oil markets are also contending with wider macro uncertainty after the Supreme Court of the United States invalidated an earlier round of tariffs introduced under emergency powers.
Donald Trump has since sought to reinstate duties of up to 15% using alternative legal provisions and cautioned that countries that “play games” in trade negotiations with the U.S. could be hit with steeper tariffs.
The risk of renewed trade tensions has darkened the global growth and fuel demand outlook, limiting oil’s advance even as geopolitical concerns continue to lend support to prices.
The Australian government has pledged to “consider every possible response” after President Donald Trump raised the standard import tariff to 15%. The abrupt increase came just a day after an initial 10% rate was announced, surprising global markets.
Trade Minister Don Farrell described the decision as “unjustified” and suggested it could strain relations between the long-standing strategic partners. The move follows a U.S. Supreme Court ruling that invalidated the administration’s earlier targeted tariff system as unlawful.
In reaction, the President shifted to a universal global tariff. The first 10% duty is scheduled to take effect at 12:01 a.m. EST on February 24, but the implementation date for the additional 5% remains uncertain, leaving exporters with goods already in transit facing heightened uncertainty.
Economic repercussions and Australia’s reaction
For Australia, the implications are significant. As a leading exporter of iron ore, LNG, and agricultural commodities, a 15% tariff could erode the competitiveness of Australian products in the U.S. market. Trade Minister Don Farrell confirmed that officials are coordinating closely with Australia’s embassy in Washington to evaluate the potential impact.
Analysts note that keeping “all options on the table” may involve filing a formal complaint with the World Trade Organization (WTO) or imposing reciprocal, tit-for-tat duties on American imports. Such action would represent an unusual trade clash between AUKUS allies.
The across-the-board 15% tariff reflects a broad, uniform policy that overlooks customary bilateral arrangements. Should Canberra proceed with countermeasures, it could affect multi-billion-dollar energy and defense agreements that are currently being negotiated.
Market turbulence and the investor outlook
Investors are already responding to the uncertainty. The Australian Dollar (AUD) came under immediate pressure as traders assessed the potential blow to the nation’s trade balance, while mining and energy shares adopted a more cautious tone.
Should the full 15% tariff be implemented without carve-outs, Australian exporters may have to accelerate their shift toward Asian markets, potentially deepening the divide between Western trading partners.
Attention is now fixed on the February 24 deadline. If the White House does not clarify whether allies will receive exemptions, the risk of a formal trade conflict increases. Analysts caution that much of the added cost could ultimately be passed on to American consumers, heightening concerns about renewed inflation.
For more than a year, Donald Trump has operated in Washington with sweeping confidence, exercising power in ways critics said resembled monarchical authority. On Friday, however, the Supreme Court of the United States sharply redirected that momentum.
By invalidating his administration’s cornerstone economic policy, the court handed down a rare and highly visible rebuke, signaling that even a dominant president faces constitutional limits. The 6–3 ruling, written by Chief Justice John Roberts, rejected Trump’s expansive claim that he could impose broad tariffs under emergency powers to safeguard U.S. economic security.
Trump reacted swiftly and angrily. According to Delaware Governor Matt Meyer, the president told governors at the White House that he was “seething” and needed to respond to the courts. Later, speaking to reporters, he criticized the justices who ruled against him — including two he had appointed — calling them weak and an embarrassment. Still, he maintained that the decision ultimately clarified his authority and insisted he could pursue even higher tariffs through alternative legal avenues.
Few issues have defined Trump’s second term more than tariffs, which he has frequently described as his “favorite word.” He used them not only as trade tools but as leverage in disputes over agriculture, foreign investment, narcotics trafficking, prescription drug pricing, and industrial policy. While Congress holds constitutional authority over taxation, the Republican-controlled legislature largely refrained from challenging his approach, and the conservative-leaning court had often bolstered executive power in prior rulings.
This decision, however, marked a boundary. Historians and legal scholars described it as a direct blow to Trump’s broad interpretation of emergency authority under the International Emergency Economic Powers Act. Although the president suggested he could rely on other statutes — and even impose a temporary global tariff — such paths would likely involve stricter procedural requirements and time constraints.
Legal experts noted that no previous president had used the disputed law as aggressively. As University of Virginia scholar Saikrishna Prakash put it, the ruling leaves the presidency “definitely weaker,” underscoring that even assertive executive power remains subject to judicial review.
The U.S. Supreme Court’s decision on Friday to overturn trade tariffs introduced by President Donald Trump last year could ease financial pressure on certain oil producers and drilling firms, though analysts say it is unlikely to significantly reshape global energy trade flows in the near term.
By striking down the tariffs, the Supreme Court of the United States may lower the cost of constructing LNG facilities and other major energy projects that depend on foreign-made modules and components. For instance, Venture Global assembles parts of its LNG plants in Italy before shipping them to the U.S. for completion — a process that had become more expensive under the tariff regime. U.S. crude producers and oilfield service firms also faced higher costs for imported equipment and materials, with some absorbing the impact and others attempting to pass it along to customers.
Cam Hewell, CEO of Premium Oilfield Technologies, said his company had expected to pay $5–6 million in tariff-related taxes in 2026 — a figure that may now decline. He noted that most of the added costs had been absorbed internally, meaning customer pricing would see little change, but improved cash flow could support research, employee compensation, and shareholder returns.
Kirk Edwards, president of Latigo Petroleum in Texas, added that the ruling could improve budgeting clarity and cost visibility for drilling projects.
However, the decision does not eliminate the 50% tariffs on steel and aluminum imposed last year, and some executives remain cautious that the administration could pursue alternative measures to maintain similar trade barriers. Trump himself indicated he may introduce a 10% global tariff for 150 days, signaling that policy uncertainty remains.
Despite the potential cost relief for LNG infrastructure, experts believe global LNG trade patterns are unlikely to shift materially. Ira Joseph of Columbia University’s Center on Global Energy Policy said China has stronger economic incentives to continue redirecting U.S. LNG cargoes to Europe for arbitrage or to import cheaper oil-indexed LNG from the Middle East.
Alex Munton of Rapidan Energy added that Beijing increasingly views LNG purchases as strategic leverage in its relationship with Washington, making new buying commitments unlikely even if tariff pressures ease. Samantha Santa Maria-Hartke of Vortexa echoed that view, suggesting China — which halted U.S. crude and LNG imports after imposing retaliatory tariffs — is unlikely to reverse course in the near term.
Oil prices advanced in Asian trading on Wednesday as investors monitored developments in U.S.-Iran relations and looked ahead to travel demand during an upcoming major holiday in China.
Crude rebounded from part of the previous session’s losses, supported by a softer U.S. dollar ahead of key economic data releases.
By 21:04 ET (02:04 GMT), April Brent futures climbed 0.6% to $69.18 a barrel, while WTI crude futures also gained 0.6% to $64.19 a barrel.
Oil prices rise amid US-Iran tensions over potential supply disruptions.
On Tuesday, Iranian officials stated that recent nuclear discussions with the United States helped Tehran assess Washington’s intentions, adding that diplomatic engagement between the two nations would continue.
The remarks followed talks held last week regarding Iran’s nuclear program, which came after U.S. President Donald Trump sent several warships to the Middle East.
Although both sides indicated some progress from their weekend negotiations, attention shifted after the U.S. issued a maritime warning for vessels passing through the Strait of Hormuz.
Media reports also suggested that Trump was weighing the deployment of a second aircraft carrier near Iran—a step that could significantly heighten regional tensions.
Amid the uncertainty, oil markets incorporated a risk premium, as traders grew concerned that potential military action might disrupt Iranian oil supplies.
China’s Lunar New Year travel surge draws attention as CPI data falls short of expectations.
Oil prices found some support on expectations of stronger Chinese fuel consumption during the upcoming Lunar New Year holiday.
This year’s Lunar New Year, marking the Year of the Horse in the Chinese zodiac, falls on February 17 and will be observed with an extended nine-day public holiday from February 15 to 23.
The festive period typically drives higher consumer spending in China, particularly in travel. Authorities project a record 9.5 billion passenger journeys during the spring holiday travel rush.
International travel is set to include several favored destinations across Southeast Asia, though flights to Japan have reportedly declined sharply amid escalating diplomatic tensions between Beijing and Tokyo.
Meanwhile, recent economic data signaled that deflationary pressures persist in China, as consumer price index figures came in below expectations and producer prices continued to contract.
Last week, I attended the 2026 Harvard Presidents’ Seminar with leading executives and thinkers, where Ambassador Kevin Rudd, former Australian prime minister, stood out. He warned that the post–World War II rules-based global order is likely fading, giving way to a more 19th-century style world defined by power politics and spheres of influence. Rudd, a realist rather than an alarmist, argued that a strong U.S. remains essential for global stability, while a weakened U.S. risks creating power vacuums that China and Russia are ready to exploit.
A Fracturing Global Order?
For roughly eight decades after World War II, the United States played a central role in shaping the global order—promoting open markets, free trade, democratic expansion, and the U.S. dollar as the world’s reserve currency—underpinning a period of relative stability.
According to Rudd, that chapter may now be closing. Democratic governance is weakening worldwide, while the number of armed conflicts has climbed to its highest level since World War II.
China and Russia are making their ambitions increasingly explicit. Just last week, Xi Jinping and Vladimir Putin reaffirmed their deepening partnership, pledging mutual support across economic, military, and ideological fronts. With the New START treaty expiring this month, the final pillar of nuclear arms control between the United States and Russia has now fallen away.
Redrawing the Global Playbook
Rudd, who has written two major books on Xi Jinping, cautioned that China’s current leader is far from a pragmatist in the mold of Deng Xiaoping, whose market-oriented reforms in the 1970s set China on its path to global prominence. Instead, Xi is best understood as a Marxist-Leninist nationalist.
Under his leadership, China has moved beyond simply operating within existing global rules to actively reshaping them. The Chinese Communist Party is pursuing an all-encompassing strategy that spans nearly every sphere—military modernization, industrial leadership, energy self-sufficiency, and more. As I noted back in October, I see China’s expansive Belt and Road Initiative as a Trojan horse.
For Xi’s government, economic strength and national security are inseparable, a reality most evident in its approach to energy and technology.
China’s Sweeping Energy Expansion
As the U.S. continues to oscillate on energy policy, China has been pressing ahead at full speed. Since 2021, it has added more power-generating capacity than the United States has built over its entire 250-year history—an astonishing feat achieved in just four years.
In 2025 alone, China brought online 543 gigawatts of new capacity across solar, wind, coal, nuclear, and gas. Looking ahead, BloombergNEF projects an additional 3.4 terawatts over the next five years—nearly six times what the U.S. is expected to add. The objective is clear: to ensure that China’s next wave of industries, including AI, robotics, and advanced manufacturing, is never constrained by energy shortages.
Clean Energy Emerges as the Next Growth Engine
As I’ve noted before, both Elon Musk and NVIDIA CEO Jensen Huang have warned that China’s enormous power surplus could give it a decisive edge in AI computing—and the data backs that up.
In 2025, clean energy accounted for more than a third of China’s GDP growth and over 90% of new investment. Industries such as solar, electric vehicles, and battery technology generated more than $2.1 trillion in economic output, roughly on par with the GDP of Canada or Brazil. Viewed on its own, China’s clean energy sector would rank as the world’s eighth-largest economy.
Meanwhile, in Washington, progress remains stalled by politics.
By contrast, the United States has struggled to execute large-scale energy buildouts amid political gridlock and partisan divides. While China plans decades ahead, U.S. policymakers too often remain focused on the next election cycle.
According to a recent report from the Information Technology and Innovation Foundation (ITIF), China is on course to overtake the U.S. across a wide range of what it terms “national power industries.” These span military sectors such as guided missiles and tanks, dual-use industries like electronic displays and semiconductors, and enabling industries including automobiles and heavy construction equipment.
That said, the U.S. continues to commit heavily to defense spending. Congress recently approved an $839 billion defense bill—$8 billion more than requested by the Pentagon—with funding directed toward key systems such as the F-35, the B-21 bomber, and the Sentinel intercontinental ballistic missile program. More than $13 billion is also allocated to space and missile defense under President Trump’s Golden Dome initiative.
What This Means for Investors
Equity markets may already be signaling the start of a new investment cycle. In January, leadership shifted toward small-cap, domestically oriented stocks. While the S&P 500 hit new highs with a gain of about 1.4%, the Russell 2000 jumped 5.4%, markedly outperforming large caps. Small caps also logged a 15-day streak of outperformance versus the S&P—the longest since May 1996.
This strength does not appear to be a one-off. Since the beginning of Trump’s second term, the Russell 2000 has edged ahead of the S&P 500, rising roughly 17% versus 15% as of Friday, February 6. Some small-cap companies, though not all, tend to be less exposed to tariffs and could benefit over time in a less globalized world.
That said, careful stock selection is critical. Around 40% of Russell 2000 constituents are currently unprofitable.
Finally, with precious metals retreating from recent highs, investors may want to consider buying the dip. A 10% allocation to gold—split evenly between physical bullion and high-quality mining stocks—can help diversify portfolios, with regular rebalancing remaining essential.
Here is what you need to know on Friday, January 30:
Markets were driven early Friday by the latest political and geopolitical developments linked to US President Donald Trump, as investors focused on the announcement of his pick for Federal Reserve Chair. Bloomberg reported that the Trump administration is preparing to nominate former Fed Governor Kevin Warsh for the role as early as Friday morning in the US.
At the same time, the Wall Street Journal noted that President Trump and Senate Democrats have reached an agreement to avoid a government shutdown.
Together with profit-taking and the Federal Reserve’s recent decision to keep interest rates unchanged, these developments helped revive demand for the US Dollar (USD), pushing it up from four-year lows against its major counterparts.
Despite the rebound, the US Dollar remains on course for a second consecutive weekly decline, weighed down by concerns over President Trump’s unpredictable foreign policy stance and repeated challenges to the Federal Reserve’s independence.
On Thursday, Trump threatened to levy a 50% tariff on all aircraft exported from Canada to the United States, accusing Ottawa of unfairly restricting the certification of Gulfstream business jets.
Reuters also reported that Trump plans to hold talks with Iran, even as the Pentagon readies for potential military action and the US steps up its naval presence in the Middle East.
In addition, the White House confirmed that Trump signed an executive order authorizing tariffs on countries that supply oil to Cuba.
Looking ahead, market attention remains firmly on Trump’s nomination of the next Fed Chair, along with the upcoming US Producer Price Index (PPI) release, which could shape the Dollar’s next move.
Before that, preliminary fourth-quarter 2025 GDP data from Germany and the Eurozone are expected to draw investor interest.
In G10 currencies, AUD/USD remains under heavy pressure below the 0.7000 mark amid profit-taking ahead of a likely Reserve Bank of Australia (RBA) rate hike next week. USD/JPY hovers near 154.00, with the Japanese Yen staying weak after softer Tokyo CPI data reduced expectations for an early Bank of Japan (BoJ) rate increase.
EUR/USD pares losses to reclaim the 1.1900 level, though downside risks persist ahead of key German and Eurozone GDP releases. GBP/USD continues to consolidate around 1.3750, weighed down by the ongoing recovery in the US Dollar.
In commodities, Gold slides nearly 4% to trade around $5,200 in early European hours after briefly testing the $5,100 level during the Asian session. Meanwhile, WTI crude oil extends its retreat from five-month highs near $66.25, trading close to $64 as Trump signals openness to talks with Iran.
President Donald Trump once again surprised markets by announcing an increase in tariffs on South Korea to 25% from 15%, citing Seoul’s failure to implement a trade agreement reached last July. The move targets sectors such as autos, lumber, and pharmaceuticals, yet South Korean equities ended up surging 2% to fresh record highs. The KOSPI initially slid more than 1%, but the dip quickly attracted buyers seeking exposure to Asia’s strongest-performing equity market of 2025.
With South Korea’s industry minister set to travel to Washington, investors appear to be betting on a negotiated climbdown, reviving the popular “TACO” trade—Trump Always Chickens Out. Few are surprised that Seoul has been reluctant to commit massive U.S. investments while the risk of abrupt tariff threats remains a defining feature of the administration.
Tariff uncertainty also boosted demand for precious metals, pushing gold and silver back toward record levels. Gold rose 1% to $5,063 an ounce, while silver jumped 5% to $109 an ounce.
Asian equities were broadly firmer, supported by optimism that blockbuster earnings from the U.S. “Magnificent Seven,” beginning with Meta, Microsoft and Tesla later this week, will help sustain the global equity rally into 2026. MSCI’s Asia-Pacific index excluding Japan climbed 1% to a new high, while Japan’s Nikkei added 0.7%, even as the yen hovered near a two-month peak—normally a headwind for exporters.
European equities are poised for a firmer open, with EURO STOXX 50 futures up 0.3%. U.S. futures are also higher, as Nasdaq futures climb nearly 0.6% and S&P 500 futures rise 0.3%. The global economic calendar remains relatively quiet ahead of Wednesday’s Federal Reserve policy decision, at which interest rates are widely expected to be left unchanged. Nevertheless, the meeting is likely to be dominated by the Justice Department’s investigation into Fed Chair Jerome Powell, adding extra scrutiny to his post-meeting press conference. Any indication that Powell may choose to remain on the Fed’s board after his term ends in May—a move permitted under Fed rules—could provoke an unpredictable reaction from President Trump.
Geopolitical tensions are rising as President Trump moves ahead with threats to levy tariffs on eight NATO allies while continuing his push regarding Greenland. Although overall markets have weakened, these frictions may spur higher defense budgets, accelerated resource reshoring, and expanded infrastructure investment. Below, we identify five U.S.-based companies that stand to gain from the intensifying U.S.–NATO standoff.
As tensions between the U.S. and NATO escalate over fresh tariffs and Greenland’s strategic resource base, defense, mining, and industrial shares appear well positioned for a strong upswing. Against this backdrop, five companies stand out—Lockheed Martin (NYSE:LMT), RTX (NYSE:RTX), Critical Metals (NASDAQ:CRML), Teck Resources (NYSE:TECK), and Caterpillar (NYSE:CAT). Each is set to benefit from increased U.S. defense spending, intensifying competition for Arctic resources, and ongoing efforts to shift supply chains away from Europe and China.
Lockheed Martin: A Leader in Arctic Defense Capabilities
Lockheed Martin appears to be among the primary beneficiaries of rising U.S.–NATO tensions, particularly as Greenland’s strategic value elevates the need for enhanced Arctic defense capabilities. The company’s advanced military platforms and surveillance systems are well suited to the region’s demanding operational environment.
Its F-35 fighter aircraft, along with missile defense and radar solutions such as the “Golden Dome,” play a central role in Arctic security, where Greenland’s geographic position strengthens U.S. monitoring capacity and deterrence against potential Russian and Chinese advances.
So far in 2026, Lockheed Martin’s shares are up roughly 19% year to date, supported by President Trump’s proposed $1.5 trillion defense budget for 2027, which points to expanded procurement activity. In periods of sustained geopolitical strain, investors typically favor companies with stable revenues and long-term contracts. Against this backdrop, Lockheed’s robust order backlog, strong free cash flow generation, and reliable dividend profile position it as a traditional “geopolitical hedge” stock.
RTX: Rising Demand Across Aerospace and Missile Systems
RTX, formerly known as Raytheon, stands out as a key beneficiary due to its broad defense technology portfolio tailored to the demanding requirements of Arctic environments. The company’s missile defense and advanced radar solutions are central to securing and monitoring strategically vital regions such as Greenland.
In particular, RTX’s Patriot missile defense system is regaining prominence as governments prioritize battle-tested platforms capable of operating in extreme climates while defending against increasingly sophisticated threats.
RTX shares are up about 7% year to date in 2026, following a strong 60% advance in 2025, with a record backlog of $251 billion underpinning continued momentum.
Looking ahead through the rest of 2026, RTX remains attractive amid rising orders from the Middle East, its inclusion in leading defense-focused ETFs, and expectations for roughly 20% earnings growth.
Critical Metals controls the Tanbreez project in Greenland, the largest non-Chinese rare earth deposit globally, directly linking the company to U.S. strategic resource objectives. Heightened geopolitical tensions could accelerate Washington’s push to secure access to these materials, which are essential for defense systems, missile technologies, and electric vehicles—reducing reliance on China and enhancing CRML’s strategic importance.
In addition, the company’s proprietary rare earth processing capabilities and its focus on North American operations position it to benefit from government initiatives aimed at strengthening domestic critical-materials supply chains and expanding strategic mineral stockpiles.
CRML shares have surged nearly 150% so far in 2026, propelled by strong high-grade drilling results and regulatory approval for its pilot processing plant in Greenland.
While the stock carries elevated risk, it offers substantial upside potential this year, with the possibility of capturing up to 50% of the Western rare earth supply. Despite ongoing volatility, secured offtake agreements and heightened U.S. national security priorities support the bullish case, with the stock still trading at an estimated 22% discount to net present value.
Teck Resources: A Global Metals and Mining Leader
Teck Resources is a leading diversified mining company with significant exposure to steelmaking coal, copper, zinc, and other essential industrial metals. While its operations are not exclusively Arctic-centric, Teck’s asset base firmly places it within the strategic raw materials space that underpins infrastructure development, defense manufacturing, and the global energy transition.
Should 2026 be marked by robust commodity demand, sustained decarbonization spending, and intensifying geopolitical rivalry, diversified miners such as Teck are well positioned to benefit from favorable pricing dynamics and rising shipment volumes.
TECK shares are up roughly 5% year to date, notching fresh 52-week highs as copper prices rally and investors rotate into the materials sector.
Looking ahead, Teck presents a compelling copper-focused opportunity, with its merger with Anglo American set to create a top-five global producer, unlock an estimated $800 million in synergies, and benefit from AI-driven demand growth. Analyst price targets in the $80–90 range are underpinned by structural supply constraints and sustained long-term commodity demand.
Caterpillar – Infrastructure & Arctic Expansion
Caterpillar stands out as a key beneficiary through its portfolio of heavy machinery and construction equipment critical to Arctic infrastructure expansion, including military installations, transportation networks, and mining projects.
Its specialized cold-weather and Arctic-rated equipment gives Caterpillar a distinct advantage in supporting development across Greenland and other high-latitude regions that gain strategic relevance amid heightened geopolitical tensions.
CAT shares are up roughly 10% year to date in 2026, building on a strong 58% gain in 2025, supported by a record backlog of $39.9 billion.
Looking ahead, Caterpillar remains a solid hold for 2026, with earnings per share projected to grow about 20.5%, aided by continued spending under the U.S. Infrastructure Act and expanding construction tied to AI-driven data center development.
Roughly $700 billion is the price tag now being discussed for a potential acquisition of Greenland, according to recent reports.
Skepticism is warranted. A transaction of that magnitude seems highly unlikely, particularly given that it would exceed half of the U.S. Defense Department’s entire 2024 budget. Public sentiment also appears far from supportive, despite President Donald Trump’s assertion that “anything less than full U.S. control of Greenland is unacceptable.”
Polling suggests little domestic support in the United States for the idea, whether pursued diplomatically or by force. A recent YouGov survey found that just 13% of Americans support compensating Greenland’s residents to join the U.S., while only 8% favor acquiring the island through military means.
Sentiment in Greenland is similarly resistant, with an overwhelming majority unwilling to leave the Danish realm, and opposition across Europe—particularly in Denmark—remains firm.
That said, dismissing Greenland’s significance altogether would be a mistake.
Why Greenland Matters—Even Without a Sale
Positioned between North America, Europe, and Russia, Greenland hosts the Pituffik Space Base, a critical site where the U.S. Space Force monitors potential threats traversing the Arctic and the North Pole.
This role has grown increasingly significant as Arctic ice continues to recede. Satellite data show that summer sea ice has been declining by more than 12% per decade—roughly 33% since 1984—opening new shipping routes and reshaping both military and commercial dynamics. As I noted last year, the Arctic is becoming not only more accessible, but also more investable.
Denmark clearly recognizes Greenland’s growing importance. The kingdom has pledged more than $4 billion toward Arctic and North Atlantic defense through 2033, coordinating closely with NATO allies. Danish and allied air, naval, and ground forces are increasing their presence on and around the island, with exercises focused on protecting critical infrastructure and conducting fighter operations in Arctic conditions. At the same time, Denmark’s Chief of Army Command, Peter Boysen, has openly discussed the need for a stronger boots-on-the-ground posture.
The Tough Realities of Developing Greenland
Greenland’s resource base adds another layer of significance. The island holds substantial deposits of iron ore, copper, zinc, graphite, tungsten, and other minerals.
Most attention, however, centers on rare earth elements (REEs)—critical materials used in technologies ranging from smartphones and fighter jets to missile guidance systems. According to the Center for Strategic and International Studies (CSIS), Greenland currently ranks eighth worldwide in proven rare earth reserves, with the potential to climb higher as exploration continues.
From a miner’s perspective, the resource potential looks compelling. In reality, however, development would be slow, complex, and highly capital-intensive.
Greenland spans an area roughly three times the size of Texas, yet it has fewer than 100 miles of roads—and none connect one town to another. Energy infrastructure is sparse, transportation costs are steep, and many mineral deposits are associated with uranium, which Greenland prohibited from mining in 2021 following strong local opposition.
In this sense, Greenland is often mischaracterized in much the same way as Venezuela. Both are portrayed as resource-rich prizes ready for rapid exploitation—rare earths in Greenland’s case, oil in Venezuela’s—but the reality is that unlocking these assets would require billions of dollars and many years of sustained investment. Illustrating the challenge, Wood Mackenzie notes that only 25 hydrocarbon exploration wells have ever been drilled in Greenland, none of which have resulted in commercial success. Neither region should be viewed as a quick path to easy riches.
China’s Efforts to Establish a Presence in Greenland Have Fallen Short
China is well aware of Greenland’s strategic and resource significance. Over the past decade, Beijing has sought to establish a presence through airport construction proposals, infrastructure investments, scientific research initiatives, and other channels.
Most of these efforts, however, have been blocked on national security grounds by either Denmark or the United States. In 2016, for example, a Chinese mining firm’s attempt to purchase a former U.S. naval base in Greenland was stopped. Two years later, China’s state-owned China Communications Construction Company (CCCC) pursued a $550 million contract to expand several Greenlandic airports, but then–U.S. Secretary of Defense James Mattis successfully urged Denmark to withdraw the bid.
So What’s Driving Trump’s Interest in Greenland?
Having said all that, why does President Trump want Greenland so badly (other than as retribution for not being awarded the Nobel Peace Prize)?
He insists it’s for national security, but, as I mentioned earlier, the U.S. military already has broad access to the island, as spelled out in the 1951 agreement signed by the U.S. and Denmark.
Further, Greenland is under the protection of NATO, of which the U.S. is a member. If Russia or China tried to attack it, Article 5 of the treaty would be triggered, activating NATO forces.
Recent reporting suggests that some of Trump’s wealthiest backers see Greenland not as a military outpost or mining play, but as a blank slate. According to Reuters, influential tech investors—including Peter Thiel and Marc Andreessen—have pitched the idea of turning parts of Greenland into a so-called “freedom city,” offering a low-regulation, quasi-autonomous hub for next-gen technologies.
Another explanation? Trump’s reaffirmation of the Monroe Doctrine, which the White House has dubbed the “Trump Corollary” or “Donroe” Doctrine. As stated in the president’s December 2 proclamation, the “American people—not foreign nations nor globalist institutions—will always control their own destiny” in the Western Hemisphere. Denmark, notably, sits in the Eastern Hemisphere.
Japan’s Gold Reserves Reach a New Record High
To conclude, central banks worldwide continue to accumulate gold as a means of supporting their currencies and reducing reliance on the U.S. dollar.
While emerging markets have driven the bulk of gold purchases over the past decade, several advanced economies have also increased their holdings. According to The Kobeissi Letter, Japan’s gold reserves reached a new record in 2025, rising to approximately $120 billion—an increase of roughly 60% compared with the previous year.
According to data from the World Gold Council (WGC), Japan now holds the world’s ninth-largest gold reserves, excluding the International Monetary Fund.
As I’ve noted previously, the actions of major institutions underscore a clear recognition of the value of hard assets like gold. For that reason, I continue to advocate allocating around 10% of a portfolio to gold, divided evenly between physical bullion and high-quality gold mining equities, with positions rebalanced annually.
All views expressed and information provided are subject to change without prior notice and may not be suitable for all investors. Links provided may direct you to third-party websites; U.S. Global Investors does not endorse and is not responsible for the accuracy or content of these external sources.
I’m not concerned about a negative market reaction at the open tied to headlines about President Trump’s interest in Greenland, as my exposure to gold stocks provides protection. Gold is surging today as a classic safe haven, offering an oasis amid uncertainty. There are always opportunities in the market, and some assets move counter to broader market swings—gold being a prime example. Among the gold names I favor are Kinross Gold, Agnico Eagle Mines, Alamos Gold, Coeur Mining, Caledonia Mining, Eldorado Gold, Idaho Strategic Resources, New Gold, OR Royalties, and SSR Mining.
I also view any pullback in high-quality technology stocks—particularly those linked to data centers and semiconductors—as a buying opportunity. Investors should not be distracted by short-term volatility or headline noise, as the U.S is simply reaffirming its global leadership position. Preferred names in the semiconductor and data center space include Bloom Energy, Power Solutions International, Comfort Systems, Vertiv Holdings, EMCOR Group, GE Vernova, and Ubiquiti.
Meanwhile, rising geopolitical uncertainty has given so-called bond vigilantes an opening to push global bond yields higher. Japan, the UK, and France remain especially vulnerable due to demographic headwinds that could constrain their ability to service government debt. U.S. Treasury yields have also moved higher, but for fundamentally stronger reasons: higher real rates, solid economic growth, and more favorable demographics relative to other developed economies. As global markets adjust to the reality of President Trump’s long-term ambitions, I expect the U.S dollar to strengthen and the 10-year Treasury yield to retreat toward 3.5% from its recent level near 4.3%.
The World Economic Forum is getting underway this week in Davos, Switzerland, with BlackRock CEO Larry Fink serving as an interim co-chair. Given BlackRock’s recent shift away from ESG and other themes long promoted at Davos, it remains to be seen whether Fink will face criticism from fellow participants. President Trump is scheduled to address the forum on Wednesday, where he is expected to outline his vision for global peace and prosperity, while also stressing the need for the U.S. to confront what he describes as destabilizing forces, including the Iranian regime.
California Governor Gavin Newsom is also expected to speak in Davos, where he plans to argue that President Trump’s economic agenda has underperformed—an argument that may prove difficult amid reports of roughly 5% GDP growth.
Heightened controversy surrounding the U.S. push to purchase Greenland from Denmark has effectively turned Davos into an emergency diplomatic gathering, with President Trump set to hold meetings with NATO allies. Italian Prime Minister Giorgia Meloni has offered to help mediate the Greenland discussions. Meanwhile, Trump has publicly criticized French President Emmanuel Macron and reportedly disclosed private communications in an attempt to highlight France’s handling of Syria. Known for his confrontational negotiating style, President Trump’s approach is likely to draw close scrutiny as European leaders assess how to respond.
WTI crude prices edged lower to around $59.25 in early European trading on Tuesday.
Tensions surrounding Iran have eased in recent days following earlier speculation about a potential U.S. attack.
Market attention is now turning to developments around Greenland after President Trump threatened to escalate tariffs on eight European countries.
West Texas Intermediate (WTI), the U.S. crude oil benchmark, was trading near $59.25 during early European hours on Tuesday. Prices edged lower as concerns over supply disruptions from Iran eased, while traders continued to assess the implications of the U.S. push to take control of Greenland.
There were no signs of escalating tensions in Iran over the weekend, although Supreme Leader Ayatollah Ali Khamenei said that 5,000 people were killed in anti-government protests this month, according to Reuters. The easing of tensions has reduced the risk of a potential U.S. attack that could disrupt supplies from a major OPEC producer, weighing on WTI prices.
Traders are turning their focus to the Greenland crisis after U.S. President Donald Trump said on Saturday that Washington would impose an additional 10% import tariff from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the United Kingdom until the U.S. is permitted to purchase Greenland.
Trump is expected to discuss Greenland at the World Economic Forum in Davos, Switzerland, on Wednesday, while European Union leaders are set to hold an emergency summit in Brussels on Thursday. Concerns that tensions could escalate into a broader U.S.–EU trade war have weighed on market sentiment and may add selling pressure to oil prices.
“With fears around Iran easing in recent days following rumors of a U.S. attack, market attention has shifted to the Greenland issue and the potential depth of any fallout between the U.S. and Europe, as an expanded trade conflict could weigh on demand,” said Janiv Shah, an analyst at Rystad.
Meanwhile, the American Petroleum Institute’s (API) crude inventory report is due later on Tuesday. A larger-than-expected draw could signal stronger demand and support WTI prices, while a bigger-than-forecast build would point to weaker demand or oversupply, potentially pressuring prices lower.
Few analysts had a U.S. invasion of Greenland anywhere near the top of their 2026 market outlooks. President Trump’s surprise weekend tariff move has triggered a classic risk-off reaction, with gold rallying around 2%, equities down 1.0–1.5%, and the dollar coming under modest pressure. This week’s World Economic Forum in Davos is now set to become a focal point for U.S.–European diplomacy, with elevated FX volatility likely.
USD: Too Early to Embrace the ‘Sell America’ Narrative
Washington escalated its pursuit of Greenland over the weekend, with the threat of 10% tariffs—potentially rising to 25%—on eight European countries appearing consistent with a broader “maximum pressure” strategy to force a deal. Political commentary in Europe suggests this could mark the end of the EU’s long-standing policy of accommodation toward the U.S., with France emerging as a key advocate for deploying the EU’s Anti-Coercion Instrument, which allows for retaliatory measures spanning tariffs, taxation, and investment restrictions against coercive trade actions.
The issue, alongside growing concerns about strains within NATO, is set to dominate the policy agenda in a week that might otherwise have focused on Ukraine. President Donald Trump is scheduled to speak at the World Economic Forum in Davos on Wednesday, followed by an EU leaders’ meeting on Thursday. A central question is whether Europe adopts China’s approach from last year—matching U.S. tariffs one-for-one—to ultimately force a de-escalation from Washington.
Initial market reactions have been cautious but telling: gold has gapped roughly 2% higher, German DAX futures are down around 1.5%, and the U.S. dollar is marginally weaker. While U.S. cash markets are closed for the Martin Luther King Jr. holiday, S&P 500 futures are indicating losses of about 0.8%. Still, it may be premature to revive the “Sell America” narrative. As with last April’s near-50% “Liberation Day” tariff threats, investors appear reluctant to chase what often proves to be aggressive rhetoric that ultimately gives way to diplomatic negotiation.
Nonetheless, these developments are likely to inject a degree of volatility into what has otherwise been a relatively calm investment environment. On the broader “Sell America” theme, we noted on Friday that there was little concrete evidence of meaningful de-dollarisation last year. Even in a scenario where geopolitical tensions were to escalate materially, it appears unlikely that the dollar would experience a sell-off on the scale of last year’s near-10% decline, particularly given that the buy-side was then unusually under-hedged in U.S. dollar exposure.
Beyond the Greenland issue, this week may also bring clarity on the future leadership of the Federal Reserve. President Trump could announce his nominee to succeed Jerome Powell as Fed Chair. The dollar rallied on Friday after reports suggested Trump wants Kevin Hassett to remain at the National Economic Council, with Kevin Warsh now viewed as the leading candidate—an outcome that would be modestly supportive for the dollar if confirmed.
Overall, U.S. economic data are likely to take a back seat to political developments in the coming days. In the near term, the dollar may probe lower levels. For DXY, gap resistance around 99.35 could cap upside, while a corrective move toward the 98.80–98.85 zone remains the mild tactical bias.
EUR: Unwelcome Developments
The renewed tensions surrounding Greenland and the prospect of fresh tariffs are particularly negative for European industry. This comes just as industrial confidence had begun to recover, with firms appearing to have adapted to last year’s tariff-related volatility. The latest developments are likely to sharpen the focus among European policymakers on boosting domestic demand and may even add momentum to long-delayed reforms such as the Savings and Investment Union, aimed at strengthening Europe’s capital markets and enhancing their competitiveness relative to the U.S.
In FX markets, EUR/USD has established support just below 1.1600. Initial intraday resistance is seen near 1.1650, with scope for a move toward the 1.1690–1.1700 area if that level is cleared. Short-dated implied volatility for EUR/USD, both one-week and one-month, has edged higher, reflecting the elevated uncertainty surrounding the week ahead.
GBP: Poised for Relative Outperformance This Week
We believe this week’s U.K. data — November employment figures and December CPI — may offer modest support to sterling, potentially extending the short-covering rally that has been underway since late November. While EUR/GBP was initially seen as the more vulnerable cross, with downside risks toward 0.8600, early-week dollar softness could shift the bulk of the move into GBP/USD. A sustained break above the 1.3415–1.3420 zone would open scope for a move toward 1.3450–1.3460.
That said, sterling historically underperforms during pronounced risk-off phases, and the current environment remains fluid with multiple cross-currents at play.
Futures tied to major U.S. stock indexes fell after President Donald Trump raised the prospect of imposing tariffs as part of his push to acquire Greenland. European leaders discussed possible retaliation against the measures, which they described as a form of blackmail. Gold climbed to a fresh record high, while oil prices edged lower as traders assessed Trump’s remarks and the EU’s response. Elsewhere, China’s economic growth slowed in the fourth quarter but still met Beijing’s 2025 target.
U.S. futures and global stocks decline
U.S. stock futures pointed lower on Monday as investors weighed President Donald Trump’s threat to impose tariffs on several European countries until the United States is allowed to acquire Greenland.
By 03:05 ET (08:05 GMT), Dow futures were down 404 points, or 0.8%, S&P 500 futures had fallen 66 points, or 1.0%, and Nasdaq 100 futures were off 336 points, or 1.3%.
With U.S. cash markets closed for the Martin Luther King Jr. Day holiday, the immediate reaction to Trump’s latest tariff threat will be delayed. Risk-off sentiment has spread globally, dragging equities lower across Europe and Asia.
ING analysts said Trump’s comments, following last year’s sweeping global tariffs, have pushed trade tensions into “an entirely new dimension,” driven less by economic considerations and more by political motives. They added that while past experience suggests caution in reacting to dramatic announcements, some of Trump’s threats over the past year have ultimately been carried out.
Focus on Trump’s Greenland tariffs
European leaders agreed on Sunday to intensify efforts to counter President Donald Trump’s tariff threats, with reports suggesting EU officials are considering strong retaliatory measures if the levies are imposed.
On Saturday, Trump said he would introduce 10% tariffs on exports from eight European countries—Denmark, Sweden, France, Germany, the Netherlands, Finland, Norway and the United Kingdom—until the United States is able to acquire Greenland. He added that the tariffs would be raised to 25% if the purchase of the semi-autonomous Danish territory does not go ahead. Trump has framed the move as a national security necessity, a claim European governments have rejected, describing it as blackmail.
Ahead of an emergency EU summit in Brussels on Thursday, member states are expected to debate a range of responses, including a potential €93 billion tariff package on U.S. imports and the possible use of the bloc’s “Anti-Coercion Instrument,” which could restrict U.S. access to investment, banking and services markets. Reuters, citing an EU source, reported that the tariff package currently has broader backing.
Trump’s latest tariff threat has also cast doubt over the future of a U.S.–EU trade agreement reached last year, with EU officials saying they cannot approve the deal while Washington pursues control of Greenland. ING analysts said that while the outcome of the dispute remains uncertain, it underscores the lack of predictability in global trade and tariff policy.
Gold reaches record high
Gold prices climbed to record highs in Asian trade on Monday, nearing $4,700 an ounce, as investors rushed into safe-haven assets following President Trump’s latest tariff threat.
Spot gold rose 1.6% to $4,667.33 an ounce by 02:26 ET (07:26 GMT), after earlier touching a record $4,690.75. U.S. gold futures also hit a new peak at $4,697.71 an ounce.
Silver prices surged more than 4% to a fresh all-time high of $94.03 an ounce, supported by safe-haven demand as well as its role as an industrial metal.
Oil prices edge lower
Oil prices edged lower, giving back part of last week’s gains as markets weighed the growing risk of a trade dispute linked to Greenland. Brent crude slipped 0.1% to $59.74 a barrel, while U.S. West Texas Intermediate fell 0.1% to $55.95.
Crude had rallied early last week on concerns that unrest in Iran could threaten oil supplies from the Middle East, a region that accounts for a significant share of global output. Much of that risk premium faded after President Trump ruled out immediate U.S. military action, leading prices to pull back before stabilizing toward the end of the week.
China’s economy meets 2025 growth target
China’s economy grew slightly more than expected in the fourth quarter of 2025, data released on Monday showed, as policy stimulus and a pickup in consumption helped the country meet its annual growth target.
Gross domestic product rose 4.5% year on year in the October–December period, in line with forecasts but down from 4.8% in the previous quarter, marking the slowest pace in three years. On a quarter-on-quarter basis, GDP expanded 1.2%, marginally above expectations of 1.1%.
The result brought full-year 2025 growth to 5%, meeting Beijing’s target. The government is widely expected to set a similar 5% growth goal again, as it continues to face heightened U.S. trade tensions, weak consumer demand and a prolonged property sector downturn.
European stocks dropped sharply on Monday after U.S. President Donald Trump threatened to impose economic sanctions on several countries in the region if they resist his plans to acquire Greenland.
By 03:05 ET (08:05 GMT), Germany’s DAX was down 1.3%, France’s CAC 40 fell 1.6% and Britain’s FTSE 100 slipped 0.4%.
Tariff threats dampen market sentiment
President Donald Trump said over the weekend that he plans to impose tariffs on exports to the United States from eight European countries that have opposed his proposal for the U.S. to acquire Greenland. The countries affected include France, Germany and the United Kingdom, along with several Nordic and northern European nations.
Trump said an initial 10% tariff would be introduced on Feb. 1, rising to 25% in June if no agreement is reached allowing the United States to take control of Greenland, the semi-autonomous territory of Denmark.
The European Union has already suspended ratification of a U.S.–EU trade agreement, and media reports indicate the bloc may revive a €93 billion tariff package targeting U.S. goods. Such a move could sharply escalate tensions and increase the risk of a wider transatlantic trade conflict.
According to IG market analyst Tony Sycamore, the latest dispute has intensified fears of NATO fragmentation and the breakdown of last year’s trade accords with European partners, pushing investors toward risk-off positioning in equities while boosting demand for safe havens such as gold and silver.
This has put the World Economic Forum, which gets under way later in the session in Davos, squarely in focus as global leaders convene, including a large U.S. delegation led by President Trump.
Euro zone inflation data due
Monday’s key economic event is the release of December eurozone inflation data, particularly with U.S. markets closed for the Martin Luther King Jr. holiday. Annual eurozone CPI is expected to come in at 2.0% in December, matching the European Central Bank’s target for the first time since mid-2025, down from 2.1% in November.
The ECB has left interest rates unchanged since ending its rate-cut cycle in June and signalled last month that it is under no immediate pressure to adjust policy, as inflation concerns have eased and growth surprised on the upside toward the end of 2025. The ECB’s next policy meeting is scheduled for early February.
Earlier data showed China’s economic growth slowed to a three-year low in the fourth quarter, with GDP expanding 4.5% year on year, compared with 4.8% in the previous quarter.
U.S. tech giants in focus
The European corporate earnings calendar is thin, though UK building products group Marshalls reported full-year 2025 adjusted profit before tax in line with market expectations despite ongoing uncertainty in its end markets.
U.S. technology heavyweights listed in Europe will also be in focus, as they could become targets of retaliatory measures by European authorities if President Trump follows through on tariff threats against European countries until the U.S. is permitted to acquire Greenland.
Crude slips lower
Oil prices edged lower on Monday, giving back part of the previous week’s gains as markets weighed the growing risk of a trade dispute linked to Greenland. Brent crude slipped 0.1% to $59.74 a barrel, while U.S. West Texas Intermediate fell 0.1% to $55.95.
Prices had climbed early last week on concerns that unrest in Iran could threaten oil supplies from the Middle East, a region that represents a large share of global production. However, much of that risk premium faded after President Trump said there would be no immediate U.S. military action, triggering a pullback before prices stabilized later in the week.
EUR/USD edges higher toward the 1.1625 area in early European trading on Monday, as the euro finds support from signs that Europe is prepared to respond to U.S. tariff measures.
The move follows President Donald Trump’s announcement of a 10% tariff on goods from several European countries, prompting pushback from European leaders.
Meanwhile, expectations that the Federal Reserve will keep interest rates unchanged at its January meeting—amid a resilient labor market and still-elevated inflation—have weighed on the U.S. dollar, providing additional support for the pair.
The EUR/USD pair advances to around 1.1625 in early European trading on Monday, snapping a four-day losing streak. The U.S. dollar comes under modest pressure against the euro after President Donald Trump threatened to escalate tariffs on eight European nations opposing his proposal for the United States to acquire Greenland.
U.S. markets are closed on Monday in observance of Martin Luther King Jr. Day.
Over the weekend, Trump announced a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom, set to take effect on February 1. He added that the levy would rise to 25% in June unless an agreement is reached allowing the U.S. to purchase Greenland.
Europe is set to respond after President Donald Trump imposed additional tariffs on key allies, with European leaders expected to convene an emergency meeting in the coming days to consider potential retaliation. Renewed concerns over a trade war and the longer-term implications of Trump’s latest move have weighed on the U.S. dollar, providing support for the EUR/USD pair.
“While one could argue the tariffs are a threat to Europe, it is actually the dollar that is absorbing most of the impact, as markets appear to be pricing in a higher political risk premium for the U.S. currency,” said Khoon Goh, head of Asia research at ANZ.
That said, stronger-than-expected U.S. labor market data released last week have delayed expectations for further Federal Reserve rate cuts until June, which could help cap downside pressure on the dollar. According to the CME FedWatch tool, markets are pricing in nearly a 95% probability that the Federal Open Market Committee will leave rates unchanged at its January 27–28, 2026 meeting.
EUR/JPY moved higher as the euro drew support from EU efforts to push back against potential U.S. tariffs on European allies.
President Donald Trump said tariffs would be imposed on eight European countries that have opposed his proposal involving Greenland.
Meanwhile, Japan’s industrial production dropped 2.7% month-on-month in November, marking its sharpest fall since January 2024.
EUR/JPY rebounded after three consecutive sessions of losses, trading near 183.60 during Asian hours on Monday. The cross found support as the euro was buoyed by reports that European Union ambassadors agreed on Sunday to intensify efforts to deter U.S. President Donald Trump from imposing tariffs on European allies, while also preparing retaliatory measures if the duties go ahead, according to diplomats.
On Saturday, Trump said he would impose tariffs on eight European countries opposing his proposal for the United States to acquire Greenland. He said a 10% levy would be applied from Feb. 1 on goods from Denmark, Sweden, France, Germany, the Netherlands and Finland, as well as Britain and Norway, until Washington is allowed to purchase Greenland, Bloomberg reported.
FILE – This July 31, 2012 file photo shows the euro sculpture in front of the headquarters of the European Central Bank, ECB, in Frankfurt, Germany. The eurozone economy has finally recouped all the ground lost in the recessions of the past eight years after official figures Friday April 29, 2016. showed that the 19-country single currency bloc expanded by a quarterly rate of 0.6 percent in the first three months of the year. (AP Photo/Michael Probst, File) ORG XMIT: LON101
Japan’s industrial production fell 2.7% month-on-month in November 2025, slightly worse than the preliminary estimate of a 2.6% decline, reversing October’s 1.5% rise and marking the steepest contraction since January 2024.
Gains in EUR/JPY could be limited as the yen finds support from expectations of Bank of Japan rate hikes and the prospect of increased fiscal spending under Prime Minister Sanae Takaichi.The BoJ is widely expected to keep its policy rate unchanged at 0.75% this week, although markets are watching for a potential move as early as June.
Last week, BoJ Governor Kazuo Ueda reiterated that the central bank stands ready to tighten policy if economic and inflation trends develop in line with its projections.
Meanwhile, Finance Minister Satsuki Katayama signaled the possibility of coordinated intervention with the United States, stressing on Friday that all options—including direct market action—remain on the table to address the yen’s recent weakness.
Most Asian currencies were little changed on Monday as fresh U.S. tariff threats against Europe dampened risk appetite, while markets also absorbed China’s slightly better-than-expected growth figures.
The U.S. Dollar Index slipped 0.2% from a seven-week peak during Asian trading, while Dollar Index futures were down 0.3% as of 03:58 GMT.
Yuan rises to a 32-month peak following China’s Q4 GDP release
China helped temper the broader risk-off sentiment after data showed the world’s second-largest economy expanded slightly faster than expected in the fourth quarter.
The GDP reading enabled China to achieve its official 5% growth target for 2025, providing some comfort on regional economic momentum despite ongoing worries about subdued domestic demand and stress in the property sector.The onshore yuan pair USD/CNY slipped 0.1% to its weakest level since May 2023.
Asia FX little changed as Trump renews Greenland tariff threats
Risk appetite weakened after U.S. President Donald Trump said he would impose tariffs on eight European countries that have opposed his proposal to acquire Greenland.
Trump said the duties would start at 10% from Feb. 1 and increase to 25% in June if no deal is reached, reigniting concerns about escalating transatlantic trade tensions and possible spillover effects on global markets.
Media reports indicated the European Union is considering suspending progress on an EU-U.S. trade agreement and may revive a previously proposed 93 billion euro tariff package on U.S. goods.
France has called on the bloc to consider deploying its anti-coercion instrument against the United States, a tool designed to respond to economic pressure from external partners.
Asian currencies mostly moved sideways, with traders remaining cautious and refraining from bold bets.
USD/KRW ticked up 0.1%, while USD/SGD slipped 0.2%.USD/INR was little changed.AUD/USD added 0.1%.
Japanese snap elections come into focus
The Japanese yen strengthened against the dollar, with USD/JPY slipping 0.2% to a 10-day low, supported by safe-haven demand amid global trade uncertainty.Domestic political developments also remained in focus after reports said Prime Minister Sanae Takaichi is weighing a snap election in the coming weeks to bolster her mandate.
“For now, the yen continues to face headwinds from election-related uncertainty, and greater clarity is unlikely before February,” MUFG analysts said in a note.
“Over the medium term, our global team still sees the yen as having been relatively weak, and we maintain a bias for USD/JPY to trend lower, subject to election outcomes,” they added.
Canada and China reached a preliminary trade agreement on Friday to sharply reduce tariffs on electric vehicles and canola, pledging to dismantle trade barriers and deepen strategic cooperation during Prime Minister Mark Carney’s visit.
On his first trip to China since 2017 by a Canadian prime minister, Carney aims to repair relations with Canada’s second-largest trading partner after the United States, following months of diplomatic outreach.
Canada will initially permit imports of up to 49,000 Chinese electric vehicles at a 6.1% most-favoured-nation tariff, Prime Minister Mark Carney said following talks with Chinese leaders, including President Xi Jinping.
The move marks a sharp reversal from the 100% tariff imposed on Chinese EVs in 2024 under former Prime Minister Justin Trudeau, in line with similar measures taken by the United States. China shipped 41,678 electric vehicles to Canada in 2023.
“This restores access to levels seen before the recent trade disputes, but within a framework that offers significantly more benefits for Canadians,” Carney said, adding that the import quota would be expanded gradually to around 70,000 vehicles over the next five years.
“To build a globally competitive electric vehicle industry, Canada must learn from innovative partners, gain access to their supply chains, and stimulate domestic demand,” Carney said, distancing himself from former prime minister Justin Trudeau’s view that tariffs were necessary to shield local manufacturers from subsidised Chinese competitors.
Canada’s decision to ease EV tariffs runs counter to U.S. policy, drawing criticism from some members of President Donald Trump’s cabinet ahead of a planned review of the U.S.–Canada–Mexico trade agreement. However, Trump himself voiced support for Carney’s approach.
“That’s exactly what he should be doing. Signing trade deals is good for him. If you can strike a deal with China, you should take it,” Trump said at the White House.
AGRI-FOOD PARTNERSHIP: Ontario Premier Doug Ford denounces the deal.
“The federal government is effectively opening the door to a surge of low-cost Chinese-made electric vehicles without firm assurances of comparable or timely investment in Canada’s economy, auto industry, or supply chains,” Ford said in a post on X.
China imposed retaliatory tariffs in March on more than $2.6 billion worth of Canadian agricultural and food exports — including canola oil and meal — in response to tariffs introduced by Trudeau. Additional duties on canola seed followed in August.
As a result, China’s imports of Canadian goods fell by 10.4% in 2025.
Under the new agreement, Canada expects China to cut tariffs on canola seed to a combined rate of around 15% by March 1, down from 84%, Carney said. He added that discriminatory tariffs on Canadian canola meal, lobsters, crabs and peas are also expected to be lifted from March 1 through at least the end of the year.
Canadian canola futures climbed.
The agreements are expected to generate nearly $3 billion in export orders for Canadian farmers, fishers and food processors, Carney said.
China’s Ministry of Commerce said it would adjust anti-dumping duties on canola and lift anti-discrimination measures on certain Canadian agricultural and seafood products, citing Canada’s decision to lower tariffs on electric vehicles.
Carney added that President Xi Jinping had agreed in principle to grant visa-free travel for Canadians visiting China, though further details were not provided.
In a statement released by state-run Xinhua, the two countries said they would resume high-level economic and financial talks, expand trade and investment, and deepen cooperation in sectors including agriculture, oil, gas and green energy.
Carney said Canada plans to double the size of its power grid over the next 15 years, creating potential opportunities for Chinese investment, including in offshore wind projects. He also said Canada is ramping up liquefied natural gas exports to Asia, with annual production set to reach 50 million tonnes by 2030, all of which will be shipped to Asian markets.
Carney says China has become “more predictable”
Given the growing complications in Canada’s trade relationship with the United States, it is unsurprising that Carney’s government is seeking to strengthen trade and investment ties with Beijing, which offers a vast market for Canadian agricultural exports, said Even Rogers Pay of Beijing-based consultancy Trivium China.
U.S. President Donald Trump has imposed tariffs on certain Canadian goods and has even suggested that the longtime U.S. ally could become America’s 51st state. China, which has also been targeted by Trump’s tariffs, is eager to deepen cooperation with a G7 country traditionally seen as part of the U.S. sphere of influence.
Asked whether China had become a more predictable and reliable partner than the United States, Carney said recent engagement with Beijing had delivered greater clarity and tangible outcomes. “Looking at how our relationship with China has evolved in recent months, it has become more predictable, and we are seeing results from that,” he said.
Carney added that he had also discussed Greenland with President Xi Jinping, saying the two leaders found their views broadly aligned. Trump has recently revived his claim to the semi-autonomous Danish territory, prompting NATO members to push back against U.S. criticism that Greenland is insufficiently defended.
Analysts said the warming of ties between Canada and China could alter the political and economic backdrop of Sino-U.S. competition, though Ottawa is unlikely to shift decisively away from Washington.
“Canada remains a core U.S. ally and is deeply integrated into American security and intelligence systems,” said Sun Chenghao, a fellow at Tsinghua University’s Centre for International Security and Strategy. “A strategic realignment away from Washington is therefore highly unlikely.”
Most Asian currencies weakened on Tuesday, with the Japanese yen falling to a one-year low, as higher oil prices fueled by unrest in Iran pressured the region. Meanwhile, new political and trade developments in the United States dampened investor sentiment.
The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, rose 0.1% after a slight decline in the previous session. Dollar Index futures were also up 0.1% as of 03:36 GMT.
Japan’s currency drops to a one-year low following news of a possible snap election
The yen was the worst-performing currency, as USD/JPY climbed 0.4% to 158.76, its highest level since January 2025. The currency came under pressure after reports suggested that Prime Minister Sanae Takaichi could call a snap election as early as February. Investors speculated that a potential election win would strengthen her mandate for expansionary fiscal policies, further weighing on the yen.
Markets focus on Trump’s tariff threat, unrest in Iran, and higher oil prices
Risk appetite across Asia stayed cautious following U.S. President Donald Trump’s announcement of a 25% tariff on goods from countries “doing business” with Iran, though specifics on timing and coverage remain unclear.
Meanwhile, oil prices rose further amid deadly anti-government protests in Iran, sparking concerns over potential supply disruptions. The unrest has also led to warnings of possible military intervention from Trump, heightening geopolitical risk premiums.
MUFG analysts noted that Asian currencies may have been negatively affected by recent rises in oil prices, driven by events in both Venezuela and Iran.
They added that, aside from China, countries like Turkey, the United Arab Emirates, and to a lesser extent Russia and India, maintain some trade connections with Iran.
In Asia, the South Korean won (USD/KRW) rose 0.4%, marking its seventh consecutive gain. The Indian rupee (USD/INR) increased slightly by 0.1%, while the Singapore dollar (USD/SGD) remained stable. In China, the onshore yuan (USD/CNY) showed little movement, whereas the offshore yuan (USD/CNH) edged up 0.1%. The Australian dollar (AUD/USD) traded mostly flat.
Concerns over Fed independence trigger risk-averse sentiment
The Trump administration has launched a criminal probe into Federal Reserve Chair Jerome Powell regarding his testimony about renovation activities at the central bank’s headquarters, raising concerns about the Fed’s independence.
In response, Powell issued a statement affirming the Fed’s autonomy and assuring that policy decisions will remain based solely on economic data and the central bank’s mandate. Several former Fed chairs and senior officials have publicly expressed their support for Powell.
“It’s a wait-and-see situation as markets attempt to gauge the actual impact of these developments,” noted analysts from ING in a recent report.
Despite a softer U.S. dollar, Asian currencies found it difficult to gain, as investors remained focused on broader U.S. political risks, trade uncertainties, and rising oil prices.
Focus is also shifting to upcoming U.S. economic reports and any indications from the Federal Reserve, as market participants reevaluate interest rate forecasts amid increased political scrutiny of the central bank.
Oil companies seeking to take part in newly approved exports of Venezuelan crude to the United States after the removal of President Nicolás Maduro are holding urgent talks to secure tankers and organize operations to safely transfer oil from ships and deteriorating Venezuelan ports, according to four sources familiar with the matter.
Trading firms and energy companies such as Chevron, Vitol, and Trafigura are vying for U.S. government contracts to export Venezuelan crude, the sources said, after President Donald Trump announced that Venezuela could deliver up to 50 million barrels of previously sanctioned oil to the United States.
Trafigura told the White House in a meeting on Friday that its first vessel is expected to load within the coming week.
After months under a U.S. blockade, Venezuela has been storing crude aboard tankers and has nearly exhausted its onshore storage capacity. Many of these vessels are aging, poorly maintained, and subject to sanctions. Due to insurance and liability restrictions, other ships cannot directly interact with sanctioned tankers—even if U.S. licenses are granted—sources added.
Onshore storage facilities have also suffered years of neglect, creating additional risks for companies attempting to load the oil.
Shipping firms including Maersk Tankers and American Eagle Tankers are among those seeking to expand ship-to-ship transfer operations in Venezuela, according to three of the sources.
According to one source, Maersk Tankers could reuse the ship-to-shore-to-ship logistics model it previously employed in Venezuela’s Amuay Bay. The company already operates in nearby Aruba and Curaçao, whose waters are frequently used for transferring Venezuelan oil. However, while such transfers are feasible in Aruba and at U.S. ports, they come at a higher cost.
In a statement, Maersk said its presence in Venezuela remains limited, with only 17 employees in the country. The company confirmed that all staff are safe and accounted for, and that there have been no changes to its ocean services. Operations are continuing with only minor delays, and the situation is being closely monitored.
Another shipping source noted that transfer operations will be further complicated by a shortage of smaller vessels needed to move oil from storage tankers to piers, where it can then be transferred to other ships, as well as by poorly maintained machinery and equipment.
American Eagle Tankers (AET), which already facilitates Chevron’s shipments of Venezuelan crude to the United States, is being contacted by potential customers seeking to expand its capacity in the region, two sources said.
Neither AET nor Chevron immediately responded to requests for comment.
Sources added that while exports could potentially return to the roughly 500,000 barrels per day that Venezuela shipped to the United States before sanctions—allowing stockpiles to be drawn down within 90 to 120 days—reaching that level will be difficult if crude must be sourced from both offshore tankers and onshore storage facilities.
Companies are also fiercely competing for loading slots at Venezuela’s main Jose oil terminal, where both capacity and operating speed are constrained. Chevron, a major joint-venture partner in the country, is working aggressively to maintain its preferential access to Venezuelan terminals while preparing its vessel fleet, according to one source.
Meanwhile, oil firms including Chevron, Vitol, and Trafigura are already securing supplies of much-needed naphtha, a Venezuelan industry source said. Naphtha is commonly blended with heavy Venezuelan crude to reduce its density, making it easier to transport and refine.
U.S. Treasury Secretary Scott Bessent announced that Australia and several other countries would participate in a meeting of finance ministers from the Group of Seven (G7) advanced economies, which he is hosting in Washington on Monday to address critical minerals.
Bessent mentioned that he has been advocating for this dedicated meeting on critical minerals since the G7 leaders’ summit last summer, and the finance ministers previously held a virtual session on the topic in December.
India was also invited to attend the meeting, Bessent told Reuters during a visit to Winnebago Industries’ engineering lab near Minneapolis, though he was uncertain if India had accepted the invitation.
It is not yet clear which other countries have been invited.
The G7 consists of the United States, Britain, Japan, France, Germany, Italy, Canada, and the European Union. Many members heavily rely on China for rare earth minerals. In June, the group agreed on a plan to secure supply chains and strengthen their economies.
In October, Australia signed an agreement with the U.S. to challenge China’s dominance in critical minerals, involving an $8.5 billion project pipeline and Australia’s proposed strategic reserve. This reserve will provide essential metals such as rare earths and lithium, which are vulnerable to supply disruptions.
Following this, Canberra reported interest from Europe, Japan, South Korea, and Singapore.
China currently dominates the critical minerals supply chain, refining between 47% and 87% of copper, lithium, cobalt, graphite, and rare earths, according to the International Energy Agency. These minerals are essential for defense technology, semiconductors, renewable energy components, batteries, and refining operations.
In recent years, Western countries have aimed to lessen their reliance on China’s critical minerals due to China’s implementation of stringent export restrictions on rare earth elements.
Monday’s meeting follows reports that China recently started limiting rare earth exports and powerful magnets to Japanese companies, and also banned the export of dual-use goods to the Japanese military.
Bessent noted that China continues to honor its commitments to buy U.S. soybeans and supply critical minerals to American companies.Monday’s meeting follows reports that China recently started limiting rare earth exports and powerful magnets to Japanese companies, and also banned the export of dual-use goods to the Japanese military.
Bessent noted that China continues to honor its commitments to buy U.S. soybeans and supply critical minerals to American companies.
Oil prices advanced during Asian trading on Friday, extending the previous session’s rebound as investors focused on possible supply disruptions in Russia and Iran amid geopolitical risks.
At the same time, fears of an immediate rise in Venezuelan oil output subsided after the U.S. Senate approved a measure requiring congressional authorization for further military action by President Trump.
Analysts said oil production in the country is unlikely to increase sharply in the near term, even with U.S. intervention.
Brent crude futures for March rose 0.7% to $62.44 a barrel, while WTI futures gained 0.7% to $58.03 by 21:04 ET (02:04 GMT). Both benchmarks rebounded to levels seen before last week’s U.S. military action in Venezuela after posting more than 4% gains on Thursday.
Oil prices were supported by positive inflation data from China, the world’s top oil importer, signaling a tentative economic recovery. However, gains were limited as traders remained cautious ahead of key U.S. nonfarm payrolls data that could affect interest rate expectations.
Markets focus on potential supply disruptions in Russia and Iran
Concerns about possible supply disruptions in Russia and the Middle East lent support to oil prices this week.
The conflict between Russia and Ukraine showed little sign of resolution, with ongoing military actions. A drone strike on a tanker headed to Russia in the Black Sea heightened fears of further interruptions to Russian crude supplies.
Compounding these concerns, reports indicated that U.S. President Donald Trump plans to endorse a bipartisan bill imposing even tougher restrictions on countries trading with Russia, aiming to increase pressure on Moscow to seek a ceasefire.
Meanwhile, Iraq’s government approved a move to nationalize operations at the West Qurna 2 oilfield—one of the world’s largest—in an effort to avoid supply disruptions stemming from U.S. sanctions on Russia.
In Iran, escalating nationwide anti-government protests have raised worries about potential impacts on oil production. The government responded with a countrywide internet blackout as demonstrations spread across major cities protesting the Nezam regime.
Market concerns over Venezuelan oil supply ease
Oil prices benefited from easing worries that a U.S. intervention in Venezuela would lead to a significant near-term surge in global crude supply.
Earlier this week, Trump stated that Caracas could deliver up to $3 billion worth of oil to the U.S. and indicated plans for long-term U.S. influence over the country.
However, Congress has advanced legislation that may restrict U.S. military involvement in Venezuela.
Many analysts noted that while U.S. involvement could eventually help boost Venezuelan oil production, persistent political turmoil and deteriorated infrastructure make any near‑term surge in output unlikely.
Oil prices initially plunged after the U.S. detained Venezuelan President Nicolás Maduro and signaled control over the country’s oil industry, but prices had fully recovered by Friday as markets judged immediate changes to supply to be limited.
Still, crude prices were experiencing their steepest annual decline in five years in 2025, weighed down by concerns over a widening supply glut and sluggish demand growth—an outlook echoed by major global institutions forecasting continued oversupply into 2026.
Oil prices weakened yesterday after President Trump said Venezuela would supply large volumes of sanctioned crude to the United States.
Energy
Developments in Venezuela remain in the spotlight, adding further downside pressure to oil prices. President Trump said Venezuela is prepared to sell up to 50 million barrels of sanctioned crude to the United States, a move that could also immediately weigh on Canadian crude exports to the U.S.
Such a deal would effectively open a release channel for Venezuelan oil, which has struggled to reach global markets due to a U.S. blockade on sanctioned tankers entering and leaving the country. Redirecting these barrels to the U.S. could ease storage constraints and reduce the need for Venezuela to curb production.
The U.S. Department of Energy confirmed that Venezuelan crude is already being marketed internationally, while Trump’s energy secretary stated that Washington intends to maintain long-term control over future Venezuelan oil sales. This strategy is reinforced by the continued tanker blockade, with two additional vessels reportedly seized yesterday.
Washington’s growing influence over Venezuela’s oil sector also raises uncertainty about the country’s future role within OPEC.
Meanwhile, Energy Information Administration (EIA) data showed U.S. crude inventories fell by 3.83 million barrels last week, the sharpest draw since late October. However, product balances were more bearish, as gasoline stocks rose by 7.7 million barrels and distillate inventories increased by 5.6 million barrels.
These inventory builds point to refinery utilization remaining firm, while implied demand for both products softened somewhat over the past week.
European gas prices moved higher yesterday, with TTF closing more than 2.5% up on the day. Colder conditions across parts of Europe, along with forecasts for below-average temperatures in the days ahead, are supporting the market. The current cold spell has also accelerated storage drawdowns, with EU gas inventories now at 58% of capacity, compared with a five-year average of 72%.
The latest positioning data show that investment funds cut their net short exposure in TTF for a third straight week. Funds purchased 6.2 TWh during the latest reporting period, reducing their net short position to 72.4 TWh.
After months of rising tensions, the United States launched a major military operation in Venezuela on 3 January 2026, resulting in the capture of President Nicolás Maduro and his wife, Cilia Flores. U.S. President Donald Trump confirmed the operation, saying Washington would administer Venezuela until a stable transition government could be established. This marks one of the most dramatic U.S. interventions in Latin America in decades, with Maduro removed from power and taken into U.S. custody.
Maduro, long a focal point of U.S. sanctions and foreign policy pressure, was transported to the United States to face federal charges—such as narco‑terrorism and drug trafficking—filed in the Southern District of New York.
Venezuela holds the world’s largest proven oil reserves, and the sudden change in leadership carries significant geopolitical and economic implications well beyond its borders.
Why Did the US Capture Maduro?
Nicolás Maduro rose through the Venezuelan political system under socialist leader Hugo Chávez and became president in 2013. His time in power was widely criticized domestically and internationally, with opponents accusing him of suppressing dissent, restricting freedoms, and holding elections that lacked credibility.
Relations with Washington deteriorated sharply, especially under the Trump administration. U.S. officials accused Maduro’s government of involvement in drug trafficking and creating conditions that fueled migration toward the United States. They also branded elements of his regime—including the Cartel of the Suns—as a terrorist organization.
Tensions escalated in 2025 when the U.S. increased the bounty for Maduro’s arrest to $50 million and expanded military pressure in the region, including strikes on vessels the U.S. claimed were tied to drug smuggling.
On 3 January 2026, after months of military buildup and diplomatic pressure, U.S. forces launched a major operation in Venezuela—code‑named Operation Absolute Resolve—that resulted in the capture of Maduro and his wife. The U.S. government framed the intervention as a law‑enforcement action tied to longstanding criminal charges against Maduro, including narcoterrorism.
The United States claims that Venezuelan officials were engaged in government‑backed drug trafficking, asserting links with the so‑called Cartel of the Suns, which Washington has designated as a terrorist organization—a claim Maduro vehemently rejects. He argues that U.S. actions were aimed at forcing regime change and securing control over Venezuela’s vast oil riches.
Only hours before his detention, Maduro made his final public appearance as president when he hosted China’s special envoy, Qiu Xiaoqi, at the Miraflores Palace to discuss bilateral relations—an event that highlighted Caracas’s reliance on foreign partnerships for political support. Shortly after that meeting, explosions were reported across Caracas.
The event went beyond a simple arrest; it sent a broader strategic message, particularly to countries like China and Iran, undermining the belief that the U.S. would refrain from acting against governments supported by foreign adversaries.
Drill, Baby, Drill
A major strategic factor behind U.S. actions in Venezuela appears to be securing access to its vast energy resources. Venezuela sits on the largest proven oil reserves on the planet, with estimates from Wood Mackenzie suggesting roughly 241 billion barrels of recoverable crude, making it a uniquely significant player in global oil markets.
Top Countries by Proven Oil Reserves (Billion Barrels)
However, Venezuela’s track record of oil output underscores just how challenging it has been to tap into its vast reserves. In the late 1990s and early 2000s, the nation was capable of producing close to 3 million barrels per day—a level that made it one of the world’s top crude exporters. But political turmoil, labor strikes, and the restructuring of the oil sector under Hugo Chávez triggered a prolonged decline. The downturn was steepened further by U.S. sanctions starting in 2017, which restricted investment, technology, and exports, driving production down sharply. After bottoming out around 374,000–500,000 bpd during the worst of the crisis, output has only modestly recovered in recent years and remains in the range of approximately 800,000–900,000 bpd.
Historical Total Venezuelan Supply
Expectations that Venezuelan oil output could quickly rebound may overstate what’s realistically achievable. History shows that even after major disruptions, rebuilding oil production takes many years and vast investment. For example, Iraq needed almost a decade and well over $200 billion in capital to restore its output after the Iraq War, while Libya still has not returned to its pre‑2011 production levels.
Venezuela’s challenges are even more severe. Most of its reserves are extra‑heavy crude that demands upgrading and blending with diluents before it can be transported and refined, a costly and technical process. Years of underinvestment, international sanctions, the erosion of PDVSA’s workforce, and the deterioration of infrastructure have compounded these production hurdles. Pipelines, upgraders, and refineries have been left in poor condition, and limited access to modern technology continues to restrict any rapid recovery.
While PDVSA has claimed that facilities were not physically damaged in recent events—suggesting limited short‑term disruption—oil markets appear capable of absorbing this uncertainty for now. Inventories remain ample, and OPEC+ has signalled that its voluntary cuts of around 1.65 million bpd could be reversed if necessary to balance markets.
In a scenario where a pro‑U.S. government enables sanctions relief and attracts foreign investment, Venezuelan exports could gradually recover. But bringing production back to around 3 million bpd would take many years and substantial infrastructure upgrades. U.S. leadership has indicated that American oil companies would play a role in operating and developing Venezuela’s oil sector, though analysts note that the heavy crude’s technical challenges and investment risks remain significant.
Meanwhile, global oil markets are structurally tightening, with world consumption exceeding 101 million bpd driven by demand growth in the U.S., China, and India. Any short‑term impact on supply may show up as a modest increase in geopolitical risk premiums, but over time, the sidelined Venezuelan barrels—currently producing around 800,000–900,000 bpd—could eventually add supply and influence prices if output scales up gradually.
In addition to oil, Venezuela sits on a wealth of mineral resources. Large deposits of iron ore, bauxite, gold, nickel, copper, zinc and other metallic minerals are concentrated mainly in the southern Guayana Shield region. The country also ranks among Latin America’s largest holders of gold, and geological assessments identify significant iron and bauxite resources alongside reserves of coal, antimony, molybdenum and other base metals.
Despite this geological potential, commercial mining activity remains very limited. Most non‑oil mineral sectors contribute only a tiny fraction of Venezuela’s economic output, and substantial foreign investment has largely been absent, meaning much of the nation’s mineral wealth has yet to be developed into large‑scale production.
The Ongoing Economic Battle Between the United States and China
Competition between modern empires today is no longer about direct confrontation but about control over key inputs. Energy, metals, and critical materials form the foundation of the modern world. When leaders signal a willingness to secure these resources directly, markets should interpret this not as mere rhetoric, but as a concrete resource strategy.
The rivalry between the United States and China is fundamentally structural rather than ideological. The U.S. is rich in energy but dependent on imported metals and rare earths. China dominates metals processing but imports around 70% of its crude oil. Each side is strong where the other is vulnerable, and both seek to turn this imbalance into strategic advantage.
Control over energy flows also carries monetary implications. Influence over Venezuelan oil is not only about supply, but also about reinforcing the petrodollar and preventing the rise of the petroyuan.
There is also a regional dimension to this rivalry. China has steadily increased its presence in Latin America through infrastructure projects and commodity-backed financing. Recent U.S. moves indicate an effort to reassert dominance in the Western Hemisphere, compelling Beijing to compete on less advantageous terms. The Trump administration’s 2025 National Security Strategy elevated the region to a core priority, effectively reviving the logic of the Monroe Doctrine—rebranded as the “Donroe Doctrine.” The aim is to bring strategically important natural resources, especially critical minerals and rare earths, under U.S.-aligned corporate control while building a hemisphere-wide supply chain that reduces dependence on China.
Across much of South America, governments are edging closer to Washington, leaving Brazil increasingly isolated. This is significant given President Lula’s openly left-leaning stance and his consistent alignment with Russia, China, and Iran. Following Trump’s capture of Maduro, betting markets on Kalshi assign a 90% probability that the presidents of Colombia and Peru will be out of office before 2027. At the same time, President Trump has again stated that Greenland should become part of the United States, reinforcing a broader strategy centered on securing critical assets.
Which Assets Could Gain from “Nation Building” in Venezuela?
A political transition in Venezuela would most directly benefit assets tied to sovereign debt restructuring, energy infrastructure, and the oil supply chain.
Venezuelan bonds are currently priced at roughly 25–35 cents on the dollar, reflecting the impact of sanctions and ongoing legal uncertainty. Under a regime-change scenario, several analysts project potential recoveries in the 30–55 cent range, supported by the prospects of debt restructuring and the easing or removal of sanctions.
Ashmore continues to rank among the largest institutional holders of Venezuelan sovereign debt. Advisory firms such as Houlihan Lokey—financial adviser to the Venezuela Creditor Committee—and Lazard, a veteran of major sovereign restructurings (including Greece and Ukraine), would likely stand to gain from the sheer scale and complexity of any debt workout. In such processes, advisers typically earn success-based fees and function as the “picks and shovels” of restructuring. Venezuela’s debt structure is widely regarded as one of the most intricate ever assembled.
Reviving Venezuela’s oil industry would demand swift rehabilitation of aging infrastructure. Technip, which historically designed much of the country’s core oil facilities, is well placed to play a leading role given its proprietary expertise—particularly if emergency repairs are fast-tracked through sole-source or no-bid contracts. Graham Corporation, a supplier of vacuum ejector systems used in heavy-oil upgrading and refining, could also benefit, since Venezuela’s crude requires vacuum distillation to prevent it from solidifying into coke.
Before exports can meaningfully increase, Venezuela will need to import substantial volumes of diluent (such as naphtha or natural gasoline) to transport its heavy crude through pipelines. Targa Resources, operator of the Galena Park Marine Terminal in Houston—a major LPG and naphtha export hub—would be a natural beneficiary if Venezuela pivots back to U.S. diluent supplies, replacing current inflows from Iran.
The clearest corporate beneficiary of regime change and nation-building in Venezuela is Chevron (NYSE: CVX). Unlike other U.S. energy majors that exited the country, Chevron has maintained an on-the-ground presence. It retains the workforce, regulatory approvals (through OFAC), and operational assets—most notably Petroboscan and Petropiar—that position it to scale up production quickly. Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP), both of which hold legacy claims and arbitration awards stemming from past expropriations, could also regain market access or pursue compensation under a revised legal and political framework.
Refiners along the U.S. Gulf Coast—such as Valero Energy (NYSE: VLO), Phillips 66 (NYSE: PSX), and Marathon Petroleum (NYSE: MPC)—were purpose-built to handle heavy, sour crude like that produced in Venezuela. Since the imposition of sanctions, these companies have had to rely on costlier substitute feedstocks. A resumption of Venezuelan supply would reduce input costs and support refining margins, assuming end-product demand remains stable.
At the sector level, a significant increase in Venezuelan output would likely weigh on oil prices, which would be negative for crude producers but positive for consumer-oriented equities. Lower energy prices are inherently deflationary and could translate into lower bond yields—conditions that are generally supportive of risk assets, all else equal.
Note: This section is for analytical purposes only and does not constitute investment advice.
Venezuela: What Comes Next for the Economy and Markets?
In a characteristically Trump-like approach, President Trump initially stated that the United States would “administer” Venezuela during the transition period. U.S. officials later confirmed that approximately 15,000 troops would remain stationed in the Caribbean, with the option of further intervention if the interim authorities in Caracas failed to comply with Washington’s demands.
Venezuela’s Supreme Court subsequently named Vice President Delcy Rodríguez as interim president. A close ally of Maduro since 2018, Rodríguez previously oversaw much of the oil-dependent economy and the country’s intelligence structures, placing her firmly within the existing power framework. She signaled a willingness “to cooperate” with the Trump administration, hinting at a potentially dramatic reset in relations between the two long-hostile governments.
International observers, including the United Nations and the Carter Center, have concluded that Venezuela’s 2024 elections lacked legitimacy and fell short of international standards. Independently verified tally sheets reviewed by analysts indicated that opposition candidate Edmundo González secured around 67% of the vote, compared with roughly 30% for Maduro.
At the same time, María Corina Machado—Nobel Peace Prize laureate and a leading figure in Venezuela’s opposition—is expected to return to the country later this month and has said the opposition is ready to take power. President Trump, however, has publicly cast doubt on the breadth of her support among the Venezuelan population.
In this context, three potential scenarios appear likely, as outlined by Gavekal Research:
“Soft” Military Rule
In the near term, the most probable outcome is the continuation of the current power structure under Rodríguez and the armed forces. For this arrangement to endure, it would likely require a pragmatic shift toward U.S. priorities—embracing a more business-friendly approach and loosening ties with traditional partners such as Russia, China, and Iran. Washington may be willing to accept this scenario if it ensures political stability and reliable access to energy supplies.
Democratic Transition
A negotiated move toward civilian governance would hinge largely on how new elections are structured. Allowing participation from the Venezuelan diaspora could significantly reshape the results, whereas restricting voting to residents inside the country would be more likely to benefit factions linked to the existing regime.
“Libya Redux” (State Breakdown)
The most destabilizing scenario would involve the collapse of central authority, triggering internal military conflict and the proliferation of armed groups. Such an outcome would heighten the risk of civil strife, renewed migration pressures, and severe disruptions to oil production and global energy markets.
The removal of Venezuela’s current leadership would likely signal a sharp shift in Washington’s stated objectives—from a focus on counter-narcotics pressure to a far more ambitious agenda: unlocking one of the world’s largest oil reserves and reopening the country to U.S. energy companies.
“The oil business in Venezuela has been a bust—a total bust—for a long period of time,” U.S. President Donald Trump told reporters on Saturday.
“We’re going to have our very large United States oil companies—the biggest anywhere in the world—go in, spend billions of dollars, fix the badly broken oil infrastructure, and start making money for the country.”
The central question for Trump’s administration is whether political change alone would be sufficient to revive an industry hollowed out by decades of mismanagement, corruption, and chronic underinvestment.
On paper, Venezuela’s oil potential is vast. Government figures put proven reserves at more than 300 billion barrels, the largest in the world, consisting largely of heavy crude prized by refiners along the U.S. Gulf Coast and in parts of Asia.
Analysts note that this heavy crude complements U.S. shale production, which is typically lighter and less suited to certain refinery configurations. In theory, Venezuela’s reserves could once again play a meaningful role in global energy markets.
In practice, however, the obstacles are formidable. Venezuela currently produces less than one million barrels per day—a fraction of its output two decades ago. Infrastructure has deteriorated severely, skilled workers have fled the country, and oil fields, pipelines, ports, and refineries would require massive capital investment merely to restore reliable operations.
Even under optimistic scenarios, years of rebuilding would be required before production could rise meaningfully. Market conditions add another layer of complexity: global oil supplies remain ample, and prices below $60 a barrel reduce the incentive for large-scale, high-risk investment abroad.
U.S. producers must therefore weigh whether capital is better deployed in stable domestic basins rather than in a country with a long history of expropriation and contract disputes.
Legal and institutional reform would also be indispensable. Venezuela would need to overhaul laws governing private investment, restructure roughly $160 billion in sovereign and quasi-sovereign debt, and resolve outstanding arbitration claims stemming from past nationalizations.
Without clear property rights and predictable regulatory frameworks, international oil companies are unlikely to commit billions of dollars, regardless of political change.
Security and governance challenges remain unresolved as well. Removing a leader does not automatically produce stability, and companies will wait to see whether a transitional government can maintain order, protect assets, and establish credible authority across the country.
The scale of reconstruction required extends far beyond oil extraction, encompassing financing, currency stabilization, and the rebuilding of core state institutions.
In that sense, unlocking Venezuela’s oil is ultimately less a question of geology than of politics, economics, and time.
THE ETERNAL SOVEREIGN 