**Global Markets and Geopolitics: Key Updates to Start the Year**

**US-Iran Tensions Rise**
US President Trump issued a strong warning to Iran, saying the US is “locked and loaded” and ready to step in if Iranian security forces harm peaceful protesters. This bold statement has increased global tensions, especially in the Middle East.

**Ukraine-Russia War: Hope for Peace**
Ukrainian President Zelensky said Ukraine is close to reaching a peace deal with Russia—just 10% away—but emphasized that any agreement won’t come at any cost. The war, however, remains active. On January 2, Ukrainian officials reported over 700 Russian attacks in the Zaporizhzhia region in just a few hours.

**Markets Start 2026 with Cautious Optimism**

– **European Stocks**: European stock markets opened strong but pulled back slightly later in the session.
– **US Futures**: US stock futures are trending higher, especially tech-heavy Nasdaq (NQ).
– **US Dollar (DXY)**: The dollar is holding steady near recent highs. The Australian and New Zealand dollars are outperforming due to a risk-on mood and rising gold prices.
– **Euro and Pound**: EUR and GBP showed little reaction to manufacturing data.
– **Japanese Yen**: Trading flat in a tight range.

**2025 FX Recap**:
– JPY gained less than 1% amid political and economic uncertainty.
– AUD jumped 8%, its best year since 2020.
– NZD climbed 3%, breaking a three-year losing streak.
– EUR rose 13.5%, and GBP gained 7.7%, both hitting their strongest levels since 2017.

**Bond Markets Mixed**
Bond yields started softer but recovered some ground:
– **US Treasuries (USTs)** and **German Bunds** are slightly down but trading near recent highs.
– **UK Gilts** also opened lower but rebounded, nearing break-even levels.

**Commodities in Focus**

– **Crude Oil**: WTI and Brent prices are slightly down, trading near the lower ends of their daily ranges. Traders are more concerned about oversupply than geopolitical risks. OPEC+ is expected to maintain current production limits through Q1 due to fears of a supply glut in 2026.

– **Gold**: Gold prices rebounded sharply, up 1.5% intraday. The yellow metal is benefiting from rising geopolitical tensions and safe-haven demand. Gold hit a record high of $4,550/oz on Dec 26 but pulled back before rallying again in early 2026.

– **Buzzard Oil Field**: Production restarted on Jan 1, boosting North Sea oil supply.

– **Australia Rail Issue**: A key rail line used by Glencore needs major repairs, possibly disrupting exports.

**Trade and Tariffs**

– **US Trade Policy**: Trump delayed tariff hikes on some furniture and kitchen goods for another year, citing ongoing trade negotiations.

– **Italy-US Tariff Deal**: The US reduced proposed tariffs on Italian pasta brands; La Molisana now faces only a 2.26% duty.

– **China Trade Moves**:
– Criticized the EU’s carbon border tax as unfair.
– Imposed import limits on beef, hurting exporters like Brazil and Australia.

– **India Tariffs**:
– Extended steel import tariffs for three more years.
– Set temporary anti-dumping duties on low-ash met coke imports.

**Europe Political Headlines**

– UK PM Starmer vowed to bring positive change in 2026 and end division.
– French President Macron called for unity and pledged to prevent foreign interference in the 2027 election.

**Economic Data Highlights**

– Manufacturing PMIs from across Europe mostly missed expectations.
– UK PMI fell to 50.6
– Germany at 47.0
– EU-wide PMI at 48.8
– Italy showed a sharper drop than expected

– UK house prices declined in December.
– EU money supply and lending activity grew modestly.

**Russia-Ukraine Conflict Updates**

– Zelensky denied Russia’s claim that Ukraine tried to drone attack Putin’s residence, calling it disinformation to derail peace talks.
– Ukraine struck two Russian oil facilities in retaliation.
– Russia claims Ukraine attacked a hotel in Kherson during New Year celebrations, killing at least 24.
– Talks between Ukraine and allies on peace efforts are ongoing, with meetings scheduled from Jan 3 to Jan 6.

**Middle East Tensions Heating Up**

– Trump warned Iran again over protester violence.
– Israel’s defense chief warned of potential mass attacks on West Bank settlements.
– UAE withdrew troops from Yemen after Saudi airstrikes on the port city of Mukalla.
– Iran is reportedly offering weapons for sale using cryptocurrency or barter deals.

**Other Global Tensions**

– US placed new sanctions on Venezuela’s oil tankers.
– Russia asked the US to stop chasing an oil tanker headed to Venezuela.
– Taiwan’s President Lai vowed to defend sovereignty after China’s military drills near the island.
– China accused Lai of falsehoods and defended its military actions as justified.

**Crypto Market Snapshot**

– Bitcoin is trading just below $90,000.
– Ethereum is holding above $3,000 as interest in digital assets remains strong.

**Asia-Pacific Market Highlights**

– **ASX 200 (Australia)**: Up slightly, with energy stocks helping offset losses in gold miners.
– **KOSPI (South Korea)**: Jumped nearly 2% to a new record high, led by Samsung Electronics after praise for its HBM chips.
– **Hang Seng (Hong Kong)**: Surged over 2.6%, boosted by education stocks and a strong IPO debut from AI chipmaker Shanghai Biren.

**Key Asia Headlines**

– China’s President Xi celebrated economic progress in his New Year speech, highlighting growth in GDP, technology, and defense strength. He also reaffirmed the goal of reunifying Taiwan with the mainland.

– China aims to boost trade by lowering power prices in industrial hubs like Jiangsu and Guangdong.

– Chinese automakers now hold nearly 13% of Europe’s EV market despite EU tariffs.

– South Korean President plans talks with China’s Xi next week to discuss peace and economic cooperation.

Stay tuned for further updates as global markets adjust to geopolitical risks, trade shifts, and policy changes across key regions.