India Scraps Tax Rule to Boost iPhone Manufacturing

OPEC+ is expected to maintain its current oil output policy for March, holding off on planned production increases when the group meets on Sunday. According to three OPEC+ delegates, the decision to pause comes even as crude prices have surged to six-month highs over concerns that the U.S. might launch military strikes against Iran, a key OPEC member.

The upcoming meeting of eight key OPEC+ producers follows a week where Brent crude closed near $70 a barrel, just shy of the $71.89 six-month peak reached on Thursday. This price strength persists despite some speculation that a supply glut in 2026 could eventually push prices lower.

Production Freeze Amid Geopolitical Tensions

The primary driver behind the recent oil price rally is the escalating tension between the United States and Iran. U.S. President Donald Trump is reportedly weighing several options against Tehran, including targeted strikes on security forces and leaders. Washington has already imposed extensive sanctions to cut off Iran's oil revenue, a critical source of state funding.

While both nations have signaled a potential willingness to engage in dialogue, Tehran stated on Friday that its defense capabilities would be part of any discussion. This tense geopolitical backdrop is keeping the oil market on edge and supporting higher prices.

Reviewing the Current OPEC+ Output Strategy

The group of eight producers—Saudi Arabia, Russia, the United Arab Emirates, Kazakhstan, Kuwait, Iraq, Algeria, and Oman—previously agreed to raise their collective production quotas by approximately 2.9 million barrels per day between April and December 2025. This increase represented about 3% of global demand.

However, the alliance then decided to freeze any further output increases for the period of January through March 2026, citing seasonally weaker consumption patterns. Sunday's meeting is expected to uphold this pause for March, with no decisions anticipated for policy beyond that month.

Sunday Meeting Details

The meeting of the eight OPEC+ members is scheduled to begin at 1330 GMT on Sunday. OPEC+, which includes the Organization of the Petroleum Exporting Countries along with Russia and other allies, collectively produces about half of the world's oil.

A separate OPEC+ panel, the Joint Ministerial Monitoring Committee (JMMC), is also set to meet on Sunday. However, this committee serves an advisory role and does not have the authority to make decisions on production policy.

Kazakhstan Supply Issues Add to Price Support

Beyond the situation in Iran, oil prices have also found support from supply disruptions in Kazakhstan. The country's oil sector has faced a series of operational issues in recent months. On Wednesday, Kazakhstan announced it was in the process of restarting its massive Tengiz oilfield in stages, but the recent losses have contributed to market tightness.

For the better part of seven years, optimists have dominated Wall Street, pushing the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite to new heights. While history suggests major stock indexes trend upward over the long run, the journey is rarely a straight line. Right now, the biggest risk to the ongoing bull market may be the one institution designed to provide stability: the U.S. Federal Reserve.

A perfect storm of internal division, leadership uncertainty, and ominous historical patterns is brewing at the central bank, creating a scenario that could halt the market rally in its tracks.

A Divided Fed Signals Deep Uncertainty

The Federal Reserve's core mission is to manage U.S. monetary policy to maximize employment and keep prices stable. Its primary tool is the federal funds rate, the overnight lending rate for banks, which influences borrowing costs across the entire economy. These decisions are made by the 12-member Federal Open Market Committee (FOMC), led by Fed Chair Jerome Powell.

Markets can tolerate a policy mistake from a unified central bank. What they historically cannot stand is a central bank at war with itself.

Fed Chair Jerome Powell's leadership is being tested by an increasingly divided FOMC.

Recently, dissent within the FOMC has become alarmingly common. Each of the last four meetings has seen at least one member disagree with the consensus decision. More significantly, the October and December meetings featured dissents in opposite directions—one member wanting no rate cut while another pushed for a larger 50-basis-point cut instead of the 25-basis-point reduction that was approved.

This is exceptionally rare. In the last 36 years, opposing dissents have occurred in only three FOMC meetings, and two of them happened in the last three months. This level of division erodes confidence and makes the Fed's future actions dangerously unpredictable.

Compounding this problem is a looming leadership change. Jerome Powell's term as Fed chair is set to expire on May 15, 2026. With President Trump's nominee still unknown, this adds another thick layer of uncertainty over a central bank already struggling with its direction.

Why Rate Cuts Can Be a Bear Market Signal

On the surface, lower interest rates seem like a clear positive for stocks. Cheaper borrowing should encourage businesses to hire, invest, and innovate. However, history tells a different and more cautionary tale.

The Fed doesn't typically begin cutting rates unless it sees significant trouble brewing in the economy. As a result, the start of a rate-easing cycle has often preceded major market downturns, not rallies.

Looking at the last three major rate-cutting cycles this century, a clear pattern emerges where stocks plunged well after the Fed started easing.

This chart shows the historical federal funds rate, illustrating the sharp easing cycles that often preceded economic downturns.

• Dot-Com Bubble (2001): The FOMC began cutting rates on January 3, 2001, eventually slashing them by 475 basis points. The stock market didn't hit its bottom until 645 days after that first cut.

• Financial Crisis (2007): The Fed started easing on September 18, 2007, ultimately taking rates from 5% down to near zero. It took 538 days from that initial cut for the major indexes to find their floor.

• COVID-19 Crash (2019): Before the pandemic-induced crash, the Fed began cutting rates on August 1, 2019. The market bottomed out 236 days later.

This historical precedent, combined with the Fed's internal division and leadership questions, creates a potent mix of risks for investors. While the long-term outlook for stocks remains positive, 2026 is shaping up to be a volatile and potentially vulnerable period for the market.

Iran has sharply escalated its confrontation with the West, declaring it now considers all European Union militaries to be terrorist groups. The move, announced on February 1, 2026, is a direct retaliation against the EU for designating Iran's own Islamic Revolutionary Guard Corps a terrorist organization.

This development comes as Tehran navigates a tense standoff with the United States. While Iranian President Masoud Pezeshkian is publicly calling for a peaceful, diplomatic resolution, US President Donald Trump continues to hint at military action, noting a US naval fleet is deploying near the region.

Tehran's Retaliation: EU Militaries Now on Terror List

Iran's parliament speaker, Mohammad Bagher Qalibaf, announced Sunday that Tehran has officially classified all EU armed forces as terrorist organizations. The decision mirrors the EU's recent blacklisting of the Islamic Revolutionary Guard Corps (IRGC) over its crackdown on nationwide anti-government protests.

In a symbolic show of support, Qalibaf and other members of the Iranian parliament wore Guard uniforms during the session.

"By seeking to strike at the (Guard), which itself has been the greatest barrier to the spread of terrorism to Europe, Europeans have in fact shot themselves in the foot," Qalibaf stated. He accused EU nations of "blind obedience to the Americans" against their own interests.

Members of Iran's Islamic Revolutionary Guard Corps, which the EU recently designated a terrorist organization, prompting a retaliatory move from Tehran.

Citing Article 7 of a counter-terrorism law, Qalibaf confirmed the new designation for European armies. He also noted that the parliamentary commission on national security will consider expelling military attachés from EU countries.

US Tensions: Calls for Peace Clash with Military Posturing

While taking a hard line with Europe, Iran's leadership is sending mixed signals regarding the United States.

President Masoud Pezeshkian has emphasized the need for diplomacy to de-escalate tensions. In a phone call with Egyptian President Abdel Fattah al-Sissi, Pezeshkian said Iran has never wanted a war and does not seek one now, according to the state news agency IRNA. The report added that Tehran "deeply believes that war will not benefit Iran, the United States, or the region."

However, these calls for peace are set against a backdrop of military threats from Washington. President Trump recently told Fox News that military action remains a possibility.

"We have a big fleet heading out there," Trump said, confirming the deployment of US warships, including a nuclear-powered aircraft carrier, near Iran.

Adding another layer to the situation, a top Iranian official suggested that behind-the-scenes talks may be underway. Ali Larijani, secretary general of Iran's National Security Council, wrote on X that "contrary to the artificially manufactured media war narrative, the formation of a framework for negotiations is progressing."

The UK economy is showing clear signs of strain, raising the risk of a significant recession and setting the stage for aggressive interest rate cuts by the Bank of England, according to a recent analysis by BCA Research.

Economic Red Flags Signal a Downturn

Key economic growth indicators in the United Kingdom are flashing warning signs. Analysts, including Robert Timper at BCA Research, point to weakening business confidence and deteriorating job data as evidence that the economy is on shaky ground.

The labor market, in particular, is a major source of concern. While widespread layoffs have been limited so far, falling corporate profit growth suggests that job cuts could increase. Analysts warn that the UK labor market is weakening at a worrying pace and is already exhibiting recessionary characteristics. Without a significant improvement in the data, mounting job market weakness could be enough to tip the entire economy into a recession.

Inflation Cools, Paving the Way for Policy Easing

As the economy slows, inflationary pressures are also receding. Wage growth has moderated, and price distribution in the services sector has returned to normal levels. These trends support projections that underlying inflation will fall back to the Bank of England's 2% target within the year.

This cooling inflation gives the central bank the justification it needs to shift its policy stance. The market is currently pricing in 41 basis points of interest rate cuts in 2024, followed by a more substantial 100 basis points of cuts in 2025.

Why UK Equities Remain an Attractive Investment

Despite the bleak domestic outlook, analysts at BCA Research see a compelling investment case for UK stocks. They argue that several factors could drive market performance, making UK equities a better bet than their Eurozone counterparts over the next three to six months.

Key drivers for UK stocks include:

• Monetary Easing: Potential borrowing cost reductions from the Bank of England would support equity valuations.

• Currency Weakness: A weaker British pound would boost the value of overseas earnings for UK-listed multinational corporations.

• Global Exposure: Many companies in the UK market derive a large portion of their revenue from international sales, insulating them from domestic weakness.

Furthermore, UK stocks are currently trading at a discount and are not considered overbought, offering an attractive entry point for investors.

A Potential Tailwind from the Energy Market

The energy sector could provide another catalyst for UK equities. Analysts highlight the possibility of a historic oil supply shock, potentially triggered by a collapse of the ruling regime in Iran.

Given the significant presence of major oil and gas companies on the London Stock Exchange, the UK's broad market has historically outperformed Eurozone equities during periods of rising oil prices. Such a scenario could provide an unexpected but powerful boost to UK stock performance.

India has unveiled an annual budget that doubles down on manufacturing, signaling a strategic push to boost factory output and accelerate growth in Asia's third-largest economy. Finance Minister Nirmala Sitharaman outlined a plan focused on structural reforms designed to navigate a volatile global environment.

The budget prioritizes strengthening the manufacturing sector, building a more robust financial system, and increasing investment in advanced technologies like artificial intelligence. This comes as the Modi government aims to lift manufacturing's contribution to GDP from its current level of under 20% to a more ambitious 25%, a move critical for creating jobs for millions of new workforce entrants.

The Indian economy is projected to grow by 7.4% in the current financial year, with inflation expected to be near 2%. The government forecasts a fiscal deficit of 4.4% of GDP for the same period.

A Strategic Push for 'Made in India'

To drive private investment and demand, the government's budget builds on recent reforms, including tax cuts and an overhaul of labor laws. Sitharaman identified seven key sectors for a manufacturing scale-up:

• Pharmaceuticals

• Semiconductors

• Rare earth magnets

• Chemicals

• Capital goods

• Textiles

• Sports goods

In addition to focusing on these priority areas, the government also plans to revive 200 legacy industrial clusters to further bolster its manufacturing base.

Fiscal Targets and Infrastructure Spending

A key shift in fiscal policy is the adoption of the debt-to-GDP ratio as the primary target. The government aims to reduce this ratio from 56.1% in the current year to 55.6%.

To achieve this, the fiscal deficit is targeted to remain at 4.4% in the new financial year. To finance its spending, the government will undertake gross borrowing of 17.2 trillion rupees from the bond markets.

A significant portion of this spending is earmarked for infrastructure. The budget allocates 12.2 trillion Indian rupees ($133.08 billion) for infrastructure projects in the upcoming year, an increase from 11.2 trillion rupees last year.

Reforming the Financial Sector

The government will establish a high-level committee to review the country's financial sector regulations. The goal is to ensure the financial system can effectively support a growing economy. This review will cover rules for non-banking financial companies (NBFCs) and streamline foreign investment management rules to improve market access for international investors.

The budget also introduces measures to deepen the corporate bond market. This includes the introduction of total return swaps (TRS), a type of derivative contract that allows parties to transfer the economic exposure of a bond without an outright sale. Incentives will also be provided to encourage fundraising through municipal bonds.

Modi's Vision for a Developed India

Prime Minister Narendra Modi framed the budget as part of a long-term strategy, stating, "The nation is moving away from long-term problems to tread the path of long-term solutions."

Before the budget announcement, the government's economic survey projected growth between 6.8% and 7.2% for the fiscal year starting in April. Modi affirmed that India will press ahead with "next-generation reforms," calling the next 25 years crucial for transforming the nation into a developed economy.

These domestic reforms are complemented by international trade efforts, such as a landmark agreement with the European Union, intended to counter the impact of U.S. tariffs on certain Indian goods.

How Markets Reacted to the Budget

The stock market registered a muted initial response to the budget announcement. India's benchmark Nifty 50 index was nearly flat on the day.

However, specific sectors targeted by the budget saw positive movement. Stocks in electronics manufacturing, infrastructure, textiles, and pharmaceuticals edged higher, with the Nifty pharmaceutical index rising 0.1% and an infrastructure company gauge advancing by about 0.2%.

($1 = 91.6710 Indian rupees)

India's federal government is set to spend a record 12.2 trillion rupees ($133.08 billion) on infrastructure in the 2027 fiscal year, an 11.4% annual increase designed to accelerate growth in Asia's third-largest economy amid global uncertainty.

The plan, unveiled in the federal budget presented by Finance Minister Nirmala Sitharaman, continues a strategy of significantly raising infrastructure investment that began after the COVID-19 pandemic. This approach aims to stimulate economic activity and create jobs in the world's most populous nation, with a renewed focus on the manufacturing sector.

Indian Finance Minister Nirmala Sitharaman presented the federal budget, which includes a significant increase in capital expenditure.

Record Capital Expenditure Detailed

For the current fiscal year ending in March 2026, the government's capital expenditure (capex) was revised down to 10.95 trillion rupees from the initially allocated 11.21 trillion rupees.

The upcoming fiscal year's proposed spending marks a clear commitment to continued public investment.

Figure 1: India's total expenditure from FY 2016-17 to FY 2026-27, showing a breakdown of revenue vs. capital spending. The budget proposes a total of 53.5 trillion rupees for FY27, with capital expenditure rising to 12.2 trillion rupees.

"The capex outlay for fiscal year 2027 looks a bit modest and misses market expectations slightly, but overall, a positive for the manufacturing sector," said Amit Anwani, an analyst at Prabhudas Lilladher. "It will also be good for private sector capex."

Market Reacts with Cautious Optimism

Following the budget announcement, capital goods companies saw their shares rise on the news of higher infrastructure development spending.

Key movers included:

• Larsen & Toubro

• IRB Infra

• NBCC

• Action Construction

These stocks jumped between 1.3% and 4% in response to the government's plans.

Fueling Growth Amid Global Headwinds

The consistent government spending on infrastructure, along with cuts to income and consumption taxes, has helped India's economy remain resilient. The country has so far weathered punitive U.S. tariffs imposed by President Donald Trump.

Economic growth for the current fiscal year is forecast at 7.4%, underscoring the effectiveness of the government's fiscal strategy.

($1 = 91.6710 Indian rupees)