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France's economic growth slowed to 0.2% in the fourth quarter of 2025, a significant cooldown after a strong summer rebound, according to preliminary data from the INSEE statistics office.

The figure, which matched economists' expectations, marks a deceleration from the 0.5% growth recorded in the third quarter. The slowdown was primarily driven by softer domestic demand and a reduction in business inventories.

Full-Year Growth Beats Official Targets

Despite the late-year slowdown, the French economy expanded by 0.9% over the full course of 2025. This performance outpaced the 0.7% growth assumption used by the government in its budget planning.

The stronger-than-anticipated annual result increases the likelihood that France's fiscal deficit will be slightly below the currently projected 5.4% of gross domestic product.

Resilience Amid Political Headwinds

The economy demonstrated notable resilience, holding up better than many forecasters had predicted amid months of political turbulence in a deeply divided parliament that weighed on consumer and business sentiment.

"We're off to a good start in 2026," Finance Minister Roland Lescure said on TF1 television. "I hope we'll get at least the 1% (growth) we're expecting."

Some political uncertainty is expected to ease as Prime Minister Sebastien Lecornu prepares to push the 2026 budget through parliament, ending a protracted standoff over fiscal policy. No-confidence motions from opposition parties are expected but are considered unlikely to pass.

Economists See Limited Rebound Potential

Analysts, however, caution that the prospects for a strong economic rebound remain limited. ING economist Charlotte de Montpellier described the outlook as "modestly positive," pointing to several potential drags on growth.

In a note, she stated the budget "remains unfavourable to businesses" and warned that higher taxes could curb investment and job creation. While early signs of improving business confidence are encouraging, a strong euro could also hinder French exports.

A Closer Look at Q4 Growth Drivers

The fourth-quarter growth figure was shaped by several competing economic forces:

• Domestic Demand: Strong household spending and investment collectively added 0.3 percentage points to GDP growth.

• Foreign Trade: An increase in exports paired with a decline in imports provided a significant boost, contributing 0.9 percentage points.

• Inventories: A substantial drawdown in corporate stockpiles acted as the primary drag, subtracting 1.0 percentage point from the final growth rate.

Oil prices have surged 15% in January, fueled by a series of supply disruptions and rising fears of a U.S. strike on Iran. Despite this, crude remains stuck in a familiar trading range. Tough rhetoric from Washington and Tehran is adding a risk premium, but with the global market still well-supplied, it will take a major, sustained supply shock to push prices significantly higher.

In January, Brent crude futures climbed above $70 a barrel for the first time since last July, putting the benchmark on course for its largest monthly gain since January 2022. This rally is the result of several supply setbacks coinciding with escalating geopolitical tension in the Middle East.

A String of Global Supply Shocks

January saw a substantial hit to global crude supply from multiple, unrelated incidents, with some outages expected to last for weeks or months.

• Venezuela: Exports dropped to an average of just 605,000 barrels per day (bpd) following the U.S. arrest of Nicolas Maduro. This is well below the 2025 average of 780,000 bpd as the country's oil industry struggles.

• Kazakhstan: A power outage on January 18 halted production at the massive Tengiz field. While operations have resumed, output is not expected to return to its pre-outage level of over 900,000 bpd before mid-February.

• United States: A severe winter storm knocked out up to 2 million bpd of production, representing roughly 15% of the national supply, and the recovery is still underway.

The Market's Strong Counter-Narrative: Oversupply

While these disruptions have supported prices, the gains have been capped. The primary reason is the persistent reality of a global supply glut, driven by rising output from other regions, including key OPEC producers. This surplus has been putting downward pressure on prices for months.

Underscoring this trend, the International Energy Agency (IEA) forecasts a massive oversupply of 3.7 million bpd in 2026. This projection is supported by evidence of growing onshore and offshore inventories, which provide a significant buffer against short-term disruptions.

Iran Tensions Escalate, Spiking Volatility

Adding to the bullish case, recent threats from President Donald Trump to strike Iran, coupled with a large U.S. military buildup in the region, have injected fresh anxiety into the market. The situation remains highly uncertain, with key questions about if, how, and when Washington might act—and how Tehran would retaliate.

The stakes for the oil market are extremely high. Iran, OPEC’s fourth-largest producer, pumped 3.3 million bpd in 2025, accounting for about 3% of global crude. Tehran has vowed to respond to any U.S. strike, potentially by attacking neighboring states. This raises the risk of a wider conflict that could disrupt energy exports from a region that supplies nearly 20% of the world's oil.

Market nervousness is clear. The CBOE crude oil volatility index (.OVX), a measure of expected price swings, shot up from 30 at the start of the year to over 50, its highest level since the Israel-Iran war last June.

Figure 1: The CBOE Crude Oil Volatility Index (.OVX) jumped from 30 to over 50 in January, reflecting heightened market anxiety over potential U.S.-Iran conflict.

Why the Geopolitical Risk Premium Remains Limited

With physical outages and Middle East tensions creating a bullish backdrop, why hasn't Brent crude broken out of the $60 to $80 per barrel band it has occupied for nearly two years?

The answer is that investors are only pricing in a modest geopolitical risk premium. The market's focus remains fixed on the prevailing global supply glut. Prices stayed within this same narrow range last year despite the Israel-Iran war, Ukrainian attacks on Russian oil facilities, and Trump's "Liberation Day" tariff announcement.

Figure 2: Brent crude prices have remained largely within a $60 to $80 per barrel range over the last two years, absorbing various geopolitical shocks without a sustained breakout.

Ultimately, today's oil market is less responsive to political tensions than in the past. For prices to break into triple-digit territory, a doomsday scenario—such as a regional war that severely disrupts oil flows—would likely be required. For now, traders need to see actual supply losses large enough to erode the global overhang, and that remains a very high bar to clear.

Taiwan's economy expanded by 8.63% in 2025, marking its fastest pace of growth in 15 years, driven by relentless global demand for technology essential for artificial intelligence systems.

According to a statement from Taipei's statistics bureau, the full-year growth figure significantly outpaced the 7.5% median estimate from a Bloomberg survey of economists. This surge underscores the critical role of Taiwan's tech sector in the ongoing global AI buildout.

Fourth-Quarter Performance Shatters Expectations

The economic acceleration was particularly pronounced in the final months of the year. Gross domestic product in the fourth quarter surged by 12.68% compared to the previous year, crushing the consensus estimate of 8.75%. This represents the most rapid quarterly expansion the economy has seen since 1987.

Outlook for 2026 Strengthens on AI Optimism

Confidence in Taiwan's economic momentum is expected to carry into this year. The sustained demand for AI-related hardware has prompted several financial institutions to revise their 2026 growth forecasts upward, with many now exceeding the central bank's projection of 3.67%. Goldman Sachs Group Inc. recently lifted its prediction for the year to 5.1%, a notable increase from its previous forecast of 4.4%.

This optimism is reinforced by major industry players. Taiwan Semiconductor Manufacturing Co. (TSMC), Asia's most valuable company, signaled its confidence in the longevity of the AI boom by earmarking up to $56 billion in capital spending for 2026—a projection that exceeded market expectations. The chipmaker also anticipates its revenue will grow by nearly 30% this year.

Favorable US Trade Relations Boost Exports

Beyond the AI boom, strengthening trade ties have provided another powerful tailwind. A trade agreement reached between the U.S. and Taiwan this month lowered tariffs on Taiwanese goods from 20% to 15%. The deal also includes provisions for Taiwanese companies to increase investment and financing for their American operations by as much as $500 billion.

These favorable conditions helped propel Taiwan's exports to record levels in 2025. A significant portion of these shipments—over 60%, including specialized advanced chips—were exempt from U.S. duties while the Trump administration conducted a probe into various key imports.

As a result, Taiwan's trade surplus with the United States climbed to a record $150.1 billion last year, more than doubling the $64.7 billion figure recorded in the prior year.

Ukrainian President Volodymyr Zelenskiy has announced that Kyiv is prepared to halt attacks on Russian energy infrastructure, provided Moscow agrees to a weeklong ceasefire proposed by the United States.

"If Russia does not strike our energy infrastructure—generation facilities or any other energy assets—we will not strike theirs," Zelenskiy stated to reporters in Kyiv. "We want to end the war and we are ready for de-escalation steps."

The US-Brokered Ceasefire Proposal

The offer follows a statement from U.S. President Donald Trump, who said he had asked Russian leader Vladimir Putin "not to fire into Kyiv and the various towns for a week, and he agreed to do that." However, the Kremlin has not yet confirmed any agreement to stop the missile and drone attacks that have crippled Ukraine's energy grid.

These Russian strikes have caused widespread power and heating outages during a period of extreme winter cold. With temperatures projected to fall below -20°C (-4°F), the blackouts have intensified the hardship for Ukraine's population.

Zelenskiy described Trump's proposal as "an opportunity rather than an agreement," adding, "Whether it will work or not, and what exactly will work, I cannot say at this point."

A War on Infrastructure

As the war approaches its fourth year with frontlines in the east and south moving slowly, Russia has increasingly targeted civilian infrastructure to weaken Ukrainian morale. In response, Ukraine has launched its own campaign against Russian oil refineries and other key facilities, aiming to disrupt Moscow's ability to finance its military operations through energy sales.

Despite the truce discussions, Russian attacks continued overnight with the launch of one ballistic missile and 111 combat drones, according to Ukraine's Air Force. The scale of this assault was notably smaller than some of Russia's more intense recent barrages.

Zelenskiy also criticized European allies for delays in supplying missiles for air-defense systems. He argued these delays have made Ukraine's energy infrastructure more vulnerable. "Imagine this: I know that ballistic missiles are incoming against our energy infrastructure; I know that Patriot systems are deployed; and I know that there will be no electricity, because there are no missiles to intercept them," he said.

Sticking Points in Peace Negotiations

The potential truce is being discussed as part of broader peace talks brokered by the U.S. Last week, negotiators from both sides met for two days in the United Arab Emirates. However, Zelenskiy said it remains unclear if a second meeting scheduled for Sunday in Abu Dhabi will take place.

The primary obstacle remains Russia's territorial demands. Moscow is insisting on a Ukrainian withdrawal from parts of the eastern Donetsk region that Russian forces have been unable to capture since fighting began in 2014.

Competing Visions for Donetsk

Two different solutions are on the table:

• The U.S. Proposal: Washington has suggested creating a "free economic zone" in the Donetsk region, which would entail a withdrawal of Ukrainian troops. Kyiv has rejected this idea.

• Ukraine's Stance: Kyiv has proposed halting the conflict along the current frontlines. "In my view, the least problematic possible solution is 'we stay where we are.' That is our position," Zelenskiy explained.

He emphasized that any agreement, including a free economic zone, must be fair and ensure Ukraine maintains control over the territories it currently holds. This issue was discussed in Abu Dhabi, and Ukraine is awaiting feedback from Russia at the next meeting.

The Path to Direct Talks

Zelenskiy reiterated his readiness to meet with Putin and Trump for peace talks in any neutral country, excluding Russia and its ally Belarus. He dismissed a recent offer from Kremlin foreign policy aide Yuri Ushakov for him to visit Moscow.

"I can just as well invite him to Kyiv, let him come," Zelenskiy said. "I am publicly inviting him, if he dares, of course."

China’s government revenue contracted for the first time since 2020, dropping 1.7% in 2025 as a persistent downturn in the property sector and sluggish domestic demand hit the nation's finances.

According to the finance ministry, total fiscal revenue for the year stood at 21.6 trillion yuan (approximately $3.11 trillion). The decline marks a significant reversal from the 1.3% revenue growth recorded in 2024 and is the first contraction since the 3.9% drop seen in 2020 during the initial COVID-19 outbreak.

Spending Growth Slows Amid Fiscal Strain

While revenue fell, government expenditure in 2025 rose by 1% to 28.7 trillion yuan. However, this represents a marked slowdown from the 3.6% growth in spending seen the previous year, signaling tighter fiscal conditions.

The pressure on public finances stems from a combination of weak economic drivers that are impacting the government's various income streams.

Land Sales Slump While Stock Market Taxes Surge

A detailed look at revenue sources reveals a sharply divided picture. The ongoing crisis in China's property market continues to erode a critical pillar of government income.

• Land Sales Decline: Revenue from land sales by local governments fell for the fourth consecutive year, dropping 14.7% in 2025. This followed a 16% fall in 2024. The prolonged slump in these revenues, historically a key engine for local economies, has severely strained municipal budgets and weighed on business activity.

• Mixed Tax Performance: Overall tax revenue saw a minor increase of 0.8%, but non-tax income slumped by 11.3%.

• A Stock Market Bright Spot: In stark contrast, revenue from stamp taxes on securities trading surged by 57.8%, fueled by a rally in the stock market.

Economic Outlook and Policy Response

Despite the fiscal headwinds, China's economy grew by 5.0% in 2025, meeting the official government target. This growth was largely supported by strong global demand for Chinese goods, an engine that economists warn may be difficult to sustain amid weakening domestic consumption.

In response to the challenging economic environment, Chinese leaders have committed to implementing a more proactive fiscal policy. The government plans to maintain the necessary fiscal deficit, debt levels, and expenditure scale to ensure broader economic growth.

Commodity analysts at Citi are dialing back fears of a major oil supply crisis stemming from escalating US-Iran tensions. The bank's view, reported by Reuters, is that any military action from the United States and Israel will likely be limited, avoiding a full-scale conflict that would disrupt global energy flows.

Tensions Keep a Premium on Oil Prices

While a major war is seen as unlikely, Citi expects the ongoing friction in the Middle East to sustain a "geopolitical premium" on oil prices. The analysts highlighted that potential actions, such as tanker seizures, remain a consideration for Washington and could keep the market on edge.

This analysis comes as Brent crude recently settled above $70 per barrel for the first time in months. The price rally was fueled by a combination of the Iran escalation and separate oil production disruptions in the United States, where a cold spell has impacted major producing states.

Calculating the Risk of Escalation

In a recent note, Citi put the probability of limited US and Israeli military action against Iran at 70%. The bank's reasoning for this forecast points to several key factors:

• Energy Prices: The US is sensitive to the economic impact of higher energy costs.

• Political Will: President Trump has shown a preference for avoiding direct war.

• Diplomatic Potential: Ongoing domestic pressures within Iran could create an opening for a new deal.

The long-standing risk of Iran closing the Strait of Hormuz is also considered low. Such a move would significantly harm Iran's own economy and would likely trigger a swift response from the United States.

Market Sentiment and Future Scenarios

Looking ahead, Citi's best-case scenario involves a new nuclear deal between the US and Iran this year. Such an agreement could eliminate the geopolitical risk premium currently baked into oil prices, which the bank’s analysts estimate to be between $7 and $10 per barrel.

Reflecting the cautious market mood, analysts at ING observed that "one would have to be fairly brave to head into the weekend short the market," given Trump’s recent rhetoric. They also noted that the oil market appears tighter than many had anticipated, with market indicators contradicting widespread expectations of a large surplus.