Global Central Banks Split as Economic Paths Diverge

Crude oil prices are climbing as widespread civil unrest in Iran fuels market fears of a major disruption to global energy supplies. The instability has pushed both major benchmarks to multi-week highs.

By 06:50 ET (11:50 GMT), Brent futures had gained 1.9%, trading at $65.08 a barrel and nearing a two-month peak. U.S. West Texas Intermediate (WTI) crude saw a more significant jump, rising 2.4% to $60.74, its highest level since December 8.

Protests Deepen Across Iran

The primary driver behind the market's bullish sentiment is the escalating wave of anti-government demonstrations across Iran, one of OPEC's largest oil producers.

According to a note from BCA Research dated January 12, the current protests have already surpassed the 2019-20 demonstrations in scale and are approaching the size of the 2022-23 unrest. The firm expects the situation to worsen for two main reasons:

• Loss of Credibility: The Iranian regime has lost significant credibility with the public over the past decade.

• Leadership Succession: Opposition forces sense a rare opportunity to gain influence during the impending leadership transition from Supreme Leader Ali Khamenei.

Geopolitical Tensions Flare

As the protests expand across different social classes and geographic regions, both Iran and the United States have started exchanging military threats, raising the stakes.

While Iran's typical response to mass protests is violent repression, the U.S. recently warned the country against using force and stated it would "rescue" any protesters harmed by the regime. In turn, Iran threatened to target U.S. bases and regional shipping lanes if it faced action from the U.S. or Israel.

BCA Warns of 40% Risk of Oil Supply Shock

This mounting instability, which poses a risk to the Iranian regime's survival, has direct implications for the global oil market.

BCA Research now estimates that the probability of a "massive global oil supply shock" has returned to around 40%, a level it had assigned to the risk last year. The analysis highlights how closely traders are watching the domestic situation in Iran for signs of a potential supply interruption.

After a quarter-century of talks, the European Union and South America's Mercosur bloc have finalized a landmark trade agreement. The deal substantially boosts economic ties between the EU and Mercosur's members—Brazil, Argentina, Paraguay, and Uruguay—but its significance extends far beyond commerce. According to officials and analysts, the pact may reveal the limits of the Trump administration's pressure tactics in a region where U.S. influence has waned as China's has grown.

French farmers protest the EU-Mercosur trade agreement in Paris, highlighting the domestic challenges facing the landmark deal.

Did Trump's Foreign Policy Accelerate the Pact?

While South American governments are unlikely to abandon strengthening ties with China or Europe, some analysts believe President Donald Trump's efforts to flex American power may have inadvertently pushed the long-delayed EU-Mercosur agreement across the finish line.

"If credit for this deal goes to anyone, it is to the international context," said Ignacio Bartesaghi, a foreign policy adviser to multiple Uruguayan governments. "It goes to Trump's tariff war, the conflict in Ukraine, to what happened in Venezuela recently."

The Trump administration has recently employed several high-pressure strategies in the region. These include a commando raid to seize Venezuelan President Nicolas Maduro and threats to cut financial support to Honduras if a specific candidate did not win the presidential election. The administration also conditioned billions in loans to Argentina on a conservative victory in the country's midterms and used steep tariffs to pressure Brazil regarding the prosecution of former President Jair Bolsonaro, a Trump ally.

Though voters sided with Trump's preferred candidates in Honduras and Argentina, Bolsonaro was later convicted, and the U.S. eventually dropped most of the new tariffs on Brazilian goods.

The White House maintains its approach has been successful. "The return of America's pre-eminence in the Western Hemisphere, led by President Trump, is undisputed," said spokeswoman Anna Kelly. "All of the President's foreign policy actions have restored American strength after four years of weakness under Joe Biden."

Latin America Recommits to Multilateralism

Despite Washington's focus on unilateral action, few countries in Latin America appear to share the sentiment. Trump has openly criticized multilateralism, withdrawn the U.S. from several global pacts, and told The New York Times he did not need "international law."

In contrast, leaders in the region are championing rule-based international order. Even Argentine President Javier Milei, one of Trump's closest regional allies, celebrated the EU deal as a victory for "clear rules and freedom," despite also praising the U.S.-backed capture of Maduro.

A Brazilian official close to the presidency described the agreement as a "breath of fresh air" during what they called "the most shameful and negatively critical week for multilateralism in decades." The deal's finalization comes after Venezuela, a former full member, was suspended from Mercosur in 2016 for failing to meet trade and human rights standards.

A New Wave of Global Trade Deals

The EU-Mercosur agreement could be just the beginning. Welber Barral, a former Brazilian trade secretary, suggested it may encourage Mercosur to conclude other trade pacts with partners like Canada and the United Arab Emirates.

"Countries are seeking to create regional rules that can be obeyed, so they won't depend on the World Trade Organization, which is being discredited by Trump," Barral said.

This trend is not isolated to South America. Other nations hit with steep tariffs by the Trump administration are also forging new alliances. Indonesia secured a trade accord with the European Union, while Japan, South Korea, and China have pledged to increase regional trade.

Margaret Myers, director of the Asia & Latin America Program at the Inter-American Dialogue, said the deal between Europe and South America shows that many countries are committed to reinforcing global norms.

"At a time when the U.S. is breaking from the status quo, parts of Latin America appear to be upholding it," she said. "It's a wake-up call for the U.S."

A plunging yen combined with surging government bond yields has many market watchers on edge. But according to the Carlyle Group Inc., these trends are positive indicators that Japan is finally breaking free from decades of deflation.

In a recent outlook, Jason Thomas, Carlyle's head of global research and investment strategy, argued that observers are misinterpreting key market signals. The firm's analysis suggests that Japan's current economic state is one of normalization, not crisis.

The Case for Optimism

Carlyle's central argument is that the combination of rising interest rates and a weaker currency is a feature, not a bug, of Japan's economic recovery. Thomas and his team highlight that a more competitive yen directly boosts the profits of domestic businesses.

"There's nothing alarming about the normalization of interest rates in an economy that's finally exited convalescence from its deflationary slump," Thomas stated. "Don't misread market signals."

This perspective pushes back against the growing concern over the yen's sustained weakness, which recently hit a yearly low of around 158 per dollar. At the same time, yields on Japan's benchmark 10-year government bond have climbed 100 basis points over the past year to approximately 2.10%, the highest they have been since the late 1990s.

The Bank of Japan's Deliberate Pace

Under the leadership of Governor Kazuo Ueda, the Bank of Japan (BOJ) has charted a course of steady monetary tightening, a stark contrast to the policies of other major central banks in 2025. The BOJ increased borrowing costs twice last year, and traders are pricing in about 50 basis points of additional hikes by the end of 2026, according to Bloomberg data.

Despite this methodical approach, Japan's 10-year bond yields remain significantly lower than those of its major peers, especially the United States. This wide differential in real interest rates continues to put downward pressure on the yen.

Critics have called the BOJ's pace "glacial," but Thomas defends the central bank's caution. "After 20 years of deflation, some charity is warranted," he said in an interview, noting the "understandable degree of caution."

Debunking the Public Debt Narrative

Concerns about Japan's public finances have also intensified, particularly after the October election of Prime Minister Sanae Takaichi. Her government is preparing a record initial budget of ¥122.3 trillion (approximately $775 billion) for the fiscal year starting in April.

While Japan's public debt is often cited as the highest among major economies, Thomas and his team argue that simple country-by-country comparisons are misleading. Carlyle points to a 2025 study from the Federal Reserve Bank of St. Louis, which presents a different picture.

The study shows that when Japan's government investment portfolios—specifically the Fiscal Investment and Loan Program—are included in the calculation, the country's net liabilities are closer to 80% of its gross domestic product. This figure is substantially lower than that of the US.

"For my entire career, people have fretted about Japan," Thomas concluded. "Many people who have been wrong about Japan for a long time now see a new opening."

Cubans are bracing for severe shortages and widespread blackouts as a critical lifeline of Venezuelan oil has been cut off, a direct result of U.S. policy under President Donald Trump. The island nation is now confronting a siege-like scenario, compounding an already fragile economy.

Shipping data and internal documents from Venezuelan state oil company PDVSA confirm that no crude oil or fuel has been sent to Cuba for approximately a month. This halt in shipments began even before the U.S. capture of Venezuelan leader Nicolas Maduro in early January, as an American blockade tightened its grip on the trade route.

The last oil delivery intended for refining in Cuba departed from PDVSA's Jose port in mid-December. The tanker, carrying around 600,000 barrels of Venezuelan crude, sailed with its transponder turned off to avoid detection.

A "Catastrophic" Outlook for Cuba's Energy Supply

The sudden stop in Venezuelan oil deliveries represents a massive shock to Cuba's energy system. In 2025, Venezuela was the island's primary supplier, providing 26,500 barrels per day (bpd), which accounted for roughly one-third of the nation's daily consumption. Mexico was a distant second, supplying around 5,000 bpd.

Energy experts are sounding the alarm about the potential consequences. "I just don't see any light at the end of the tunnel for Cuba to survive the next few months facing zero deliveries of oil from Venezuela," said Jorge Pinon, an energy researcher at the University of Texas at Austin. "The situation is going to be catastrophic."

President Trump has openly stated his goal of using the U.S. intervention in Venezuela to destabilize Cuba. He recently intensified his rhetoric, urging the island nation on Sunday to negotiate a deal "before it is too late."

Caught Between US Pressure and Government Defiance

The critical question now is how long Cuban President Miguel Diaz-Canel's government can withstand the pressure of dwindling fuel imports. For the island's residents, who already struggle to find food, medicine, and fuel, the uncertainty is palpable.

"It's very stressful because we don't know what decision the Cuban government will make or what actions the United States government will take," commented Victor Romero, a 75-year-old retired state worker from Havana.

President Diaz-Canel has responded with defiance. "Nobody tells us what to do," he declared on Sunday following Trump's threats. "Cuba is...prepared to defend the homeland until the last drop of blood."

Daily Life Under Strain: From Charcoal Stoves to Horse Carts

Outside the capital, much of rural Cuba already operates with minimal modern infrastructure. Horse-drawn carriages and bicycles are common modes of transportation, internet access is unreliable, and electricity is often off for more hours than it is on.

Deyanira Gonzalez, a 57-year-old housewife living in the countryside near Havana, says she already cooks with charcoal due to inconsistent electricity and the high cost or unavailability of liquefied gas. "What will happen now? If Donald Trump doesn't let fuel into Cuba we'll be in the dark with our kids suffering," she said.

So far, the capital city of Havana has been partially insulated from the immediate impact of the fuel cutoff. Many residents report that blackouts have eased slightly in early January as power demand fell from its December peak. Gasoline and diesel remain available at service stations, though they are rationed in the local peso currency.

Few Allies and Limited Options for Fuel Imports

It remains unclear how much oil Cuba has in its strategic reserves. Furthermore, the island's traditional political allies appear unwilling to risk angering the United States by providing significant aid.

"We have not seen any support whatsoever from Cuba's political allies, who are also exporters of oil, like Angola, Algeria, Brazil," noted energy expert Pinon. "No one is coming to Cuba's aid, with the exception of maybe Mexico, in limited amount, and also Russia, in limited amount."

A tanker from Mexico, the Ocean Mariner, did arrive in Havana on Friday with approximately 85,000 barrels of fuel from the state-owned Pemex terminal. However, this shipment is a small fraction of what Venezuela once supplied and is insufficient to power the island of 10 million people.

This reality leaves many Cubans in a state of anxiety. "It's the uncertainty of not knowing what's going to happen," said Ivet Rodriguez, a 39-year-old entrepreneur in Havana. "I try not to even think about it."

Central banks across the globe are preparing a coordinated statement to publicly support U.S. Federal Reserve Chair Jerome Powell, according to two sources familiar with the matter. The move comes in response to the Trump administration threatening Powell with a criminal indictment.

The joint declaration, expected on Tuesday, will feature signatures from international central bankers. Its core message is a firm endorsement of Powell and a defense of the critical principle of central bank independence.

Federal Reserve Chair Jerome Powell is at the center of a dispute that has triggered a global response from monetary policymakers.

A Coordinated International Response

While the statement has been revised extensively over the past day and is still being finalized, it aims to present a united front. One source indicated that it remains unclear how many central banks will sign the initial release, but others will be welcome to join later.

The U.S. administration's probe is officially centered on the renovation of the Federal Reserve's headquarters. However, Powell has reportedly described this investigation as a "pretext" designed to exert presidential influence over interest rate decisions. This action has already drawn sharp criticism from the financial world and from prominent members of the Republican Party.

Fears of Political Influence and Global Risk

The international support for Powell is rooted in a fundamental economic concern: that political interference could shatter trust in the Federal Reserve's commitment to its inflation target. Such a loss of confidence could trigger higher inflation and significant volatility in global financial markets.

Because the United States is the world's dominant economy, any resulting inflation would likely spread through international financial channels. This "exported inflation" would complicate the efforts of other central banks to maintain price stability in their own countries, creating a ripple effect across the global economy.

United States greenhouse gas emissions climbed 2.4% in 2025, marking the first increase in two years and outpacing the nation's economic growth, according to a new report from the Rhodium Group. The analysis highlights a reversal of the recent trend where economic expansion was decoupled from emissions growth.

The primary drivers behind the surge were increased energy consumption in buildings and a significant uptick in power sector emissions. The U.S. economy, measured by real GDP, expanded by a projected 1.9% during the same period, meaning emissions intensity rose for the first time since 2022.

Power Sector Demand Revives Coal Generation

The power industry was a major contributor to the emissions increase, with its output rising by 3.8%. This was largely a consequence of soaring electricity demand from data centers powering artificial intelligence and bitcoin mining operations.

This surge in demand pushed natural gas prices higher, making coal a more economically viable alternative for power generation. As a result, coal-fired generation jumped by 13% in 2025. This marks only the second year in the past decade that the use of this carbon-intensive fuel has increased, interrupting a long-term decline that has seen coal generation fall by 64% since its 2007 peak.

Heating and Transportation Emissions Trends

Beyond the power grid, direct fuel use for heating buildings also drove emissions higher, rising by 6.8% from the previous year.

Meanwhile, transportation emissions were contained, partly due to the growing adoption of electric vehicles. However, the report cautions that the repeal of federal tax credits in 2025 could slow the growth of the EV market and apply upward pressure on emissions in this sector.

Future Outlook and Policy Impact

According to the Rhodium Group, the 2025 emissions increase does not yet reflect the full impact of policy shifts under the Trump administration, which has moved to roll back environmental regulations and reduce incentives for renewable energy.

The report warns that the situation could change in the coming years, particularly if electricity demand from data centers continues to surge and is met by existing fossil fuel plants rather than new clean energy sources.

This policy landscape represents a departure from the previous administration's climate goals. The Biden administration had set a target under the Paris climate agreement to cut greenhouse gas emissions by 61%-66% below 2005 levels by 2035. The Trump administration subsequently withdrew the United States from the Paris agreement and abandoned that target.