Oil Prices hit 4-Month High With Markets 'Rapidly Repricing Geopolitical Risk' as Iran Tensions Flare

Israeli Prime Minister Benjamin Netanyahu has estimated his country could withstand over 700 missile strikes from Iran. But this confidence belies a critical reality: Iran commands the largest ballistic missile stockpile in the Middle East, an arsenal that far exceeds that number and includes weapons for which there are no proven defenses.

As the United States maintains a significant naval presence off the Iranian coast, the prospect of a direct confrontation looms. While Netanyahu's tough stance may resonate publicly, it overlooks the true scale of the threat facing Israel and U.S. bases across the region.

The Scale of Iran's Offensive Power

Iran's missile arsenal is not just large; it is sophisticated and diverse. Many of its ballistic missiles have ranges exceeding 1,000 kilometers, allowing them to strike deep into Israeli territory directly from Iranian soil. This capability is enhanced by a growing inventory of advanced weaponry.

The arsenal includes:

• Hypersonic Weapons: These missiles fly at extreme speeds and on unpredictable trajectories, making them nearly impossible for current defense systems to intercept.

• Maneuverable Ballistic Missiles: Systems like the Kheibar Shekan and Fattah-1 are medium-range ballistic missiles (MRBMs) designed to evade regional air defenses on their way to a target.

This combination of sheer volume and technological sophistication presents a formidable challenge to any defensive network.

Israel's Multi-Layered but Strained Shield

Israel protects itself with a multi-layered air defense network developed over decades, incorporating U.S.-supplied systems. This includes the well-known Iron Dome, David's Sling, and the Patriot/Arrow systems.

During the recent 12-Day War, Israeli officials acknowledged an interception rate of 80-90%. However, this success rate comes with critical caveats. First, no system is perfect, meaning a percentage of incoming threats will always get through.

More importantly, Israel’s air defense network is not fully replenished following the last conflict. This vulnerability, combined with Iran's capacity to launch a massive, coordinated attack involving missile salvos, drone swarms, and hypersonic weapons, means Israel's defenses could be overwhelmed. A successful saturation attack could shut down the Israeli economy and inflict lasting damage at a moment of critical national vulnerability.

Tehran's Strategy of Deterrence and Escalation

Following the 12-Day War, Iran's Defense Minister, Brig. Gen. Aziz Nassirzadeh, issued a clear warning. He claimed that the missiles used in that conflict were older models and that Iran had since developed systems with "far greater capabilities."

Nassirzadeh emphasized that if Israel were to launch another attack, Tehran would not hesitate to unleash its newer, more advanced missiles. This rhetoric is backed by action. Reports indicate Iran has ramped up missile production since last June, upgrading guidance and lethality based on lessons learned from the recent conflict.

This is a deliberate strategy. Tehran is signaling to both Jerusalem and Washington that any future military action against Iran will trigger massive retaliation, carrying risks far greater than in previous encounters. The message is that Iran believes its arsenal is now numerous and capable enough to saturate the region's air defenses.

The High Stakes of a Regional Miscalculation

The strategic landscape is further complicated by the stance of neighboring Arab countries. While wary of Tehran, these nations are also concerned about Israeli military actions. They have reportedly informed the U.S. and Israel that they will neither permit their territory to be used for strikes against Iran nor participate in defending Israel from an Iranian counter-attack.

This political reality means an Israeli-American conflict with Iran would not be a short, surgical campaign. Instead, it would become a systemic stress test of Israel's national resilience and America's waning regional power. Tehran is signaling its preparedness to absorb damage while inflicting devastation on an unprecedented scale.

If Washington and Jerusalem continue to believe that precision strikes and layered defenses alone can neutralize a missile superpower, they risk a profound miscalculation. Such an assumption could lead them into a war where the costs far exceed any promised gains.

Spot gold surged to a new record high near $5,600 an ounce on Thursday before reversing course to trade sharply lower in a volatile session driven by geopolitical news.

The initial spike was fueled by intense safe-haven demand after a report emerged that U.S. President Donald Trump was considering a new military strike on Iran. Spot silver followed a similar trajectory, hitting its own all-time high before plummeting into negative territory.

A Rollercoaster Day for Precious Metals

The price action for gold and silver was dramatic. After hitting a record peak of $5,595.44, spot gold fell 4.6% to trade at $5,166.98 per ounce by 10:34 ET. April gold futures saw a similar reversal, sliding 3.1% to $5,171.14 after touching a high of $5,625.89.

Silver’s moves were even more pronounced. Spot silver crashed 6.5% to $100.02 an ounce after setting a new record of $121.65 earlier in the day.

The recent rally in precious metals has been fueled by a combination of factors, including elevated global geopolitical risk, a weak U.S. dollar, and general policy uncertainty.

Iran Tensions Drive Safe-Haven Frenzy

The primary catalyst for Thursday's market whiplash was a CNN report stating that President Trump is considering a "major new strike" on Iran following stalled negotiations over the country's nuclear program and missile production.

This development heightened fears of a broader conflict in the Middle East. The report follows the recent deployment of several U.S. ships to the region and earlier threats of military action from Trump, which he framed as potential support for protests within Iran.

The president had previously urged Iran via social media to secure a "fair and equitable" deal with Washington and cease its nuclear activities. He also warned that any future U.S. attack would be far more severe than the one on Iran's nuclear sites in mid-2025. According to CNN, Trump is now weighing airstrikes against Iranian leaders and security officials, as well as additional attacks on nuclear facilities.

Any further U.S. military action is expected to be met with retaliation from Iran, escalating regional instability. This backdrop of geopolitical tension, which includes a recent U.S. incursion in Venezuela and Trump's demands concerning Greenland, has been a significant driver for safe-haven assets like gold.

Analyst Warns Gold Rally is Overextended

Despite the bullish geopolitical narrative, some analysts see signs of exhaustion. Keith Lerner of Truist downgraded gold to neutral, citing a less favorable near-term risk-to-reward profile following the metal's exceptional performance.

"Gold now sits more than 40% above the 200-day moving average – a historic extreme," Lerner noted. He acknowledged that momentum could push prices higher but warned that the sharp rally "leaves gold increasingly vulnerable."

Adding to the complex economic picture, the U.S. Federal Reserve decided to leave interest rates unchanged, as widely expected, while presenting an upbeat outlook on the economy. However, Fed Chair Jerome Powell declined to answer questions regarding the central bank's independence in light of an ongoing Department of Justice investigation.

Copper Bucks the Trend, Hits New Peak

The sharp downturn in gold prices had a spillover effect on other metals. Spot platinum, for instance, fell 3.7% to $2,521.80 per ounce.

Copper, however, proved to be a notable exception. The industrial metal held onto its gains, with benchmark copper futures on the London Metal Exchange rallying over 9% to a record high of $14,356 a tonne.

Copper's strength was attributed to reports of additional policy support for China's beleaguered property market. As the world's largest importer of copper, China's real estate sector is a critical component of global demand.

View of the facade as construction continues on the Federal Reserve Board building in Washington, D.C., U.S., September 17, 2025. REUTERS/Ken Cedeno/File Photo

WASHINGTON, Jan 29 (Reuters) - President Trump said he intends to announce his pick to replace Federal Reserve Chair Jerome Powell next week, ending weeks of speculation over who will lead the U.S. central bank after Powell's term expires in May 2026.

Source: Reuters

Gold

Gold 290126 Daily Chart

Gold suffered a sell-off after testing historic highs as traders rushed to take profits off the table.

In case gold declines below the support at $5100 – $5110, it will head towards the next support level at $4890 – $4900.

Silver

Silver 290126 Daily Chart

Silver made an attempt to settle above the $120.00 level but lost momentum and pulled back.

A move below the $110.00 level will push silver towards the support at $103.00 – $104.00.

Platinum

Platinum 290126 Daily Chart

Platinum is down by more than 4% amid strong pullback in precious metals markets.

A successful test of the support at $2510 – $2530 will push platinum towards the next support level at $2245 – $2265.

Source: FX Empire

European nations have begun discussing a potential shared nuclear umbrella, signaling a major shift in strategic thinking as reliance on the United States comes under question. German Chancellor Friedrich Merz confirmed these preliminary talks are underway to supplement existing security agreements.

Merz emphasized that while the conversations are happening, they remain in the early stages and no immediate decisions are expected. "We know that we have to reach a number of strategic and military policy decisions, but at the moment, the time is not ripe," he told reporters.

US Alliance Doubts Fuel New Defense Talks

The move comes amid growing transatlantic friction. The Trump administration has repeatedly challenged traditional alliances, prompting European leaders to reassess their defense posture. Europe has long depended on the U.S. and its nuclear arsenal for security but has recently increased military spending in response to pressure from Washington.

President Trump’s actions have unsettled European allies, including his suggestion of purchasing Greenland from Denmark, a NATO partner, and his threats to impose tariffs. He has also previously implied that the U.S. might not defend allies who fail to meet defense spending targets, fueling concerns about the reliability of American security guarantees.

Germany's Role and Historical Constraints

For Germany, any discussion of nuclear armament is particularly sensitive. The country is prohibited from developing its own nuclear weapons under two key treaties: the 1990 "Four Plus Two" agreement that paved the way for German reunification and the 1969 nuclear non-proliferation treaty.

However, Merz noted that these obligations do not prevent Germany from exploring joint defense solutions with its partners. The talks specifically involve Europe’s only two nuclear powers, Britain and France. "These talks are taking place," Merz stated, adding that they "are also not in conflict with nuclear-sharing with the United States of America."

Technical Capacity for a European Initiative

Adding weight to the discussions, Thomas Roewekamp, the head of Germany's parliamentary defense committee, said the country possesses the technical expertise to contribute to a joint European nuclear weapon.

"We do not have missiles or warheads, but we do have a significant technological advantage that we could contribute to a joint European initiative," said Roewekamp, a member of Merz's Christian Democratic Union party. This suggests that while legally constrained from building its own arsenal, Germany could play a crucial role in a collaborative European defense framework.

Canada’s international trade deficit widened significantly in November, hitting C$2.2 billion compared to a revised C$395 million gap in October. According to new data from Statistics Canada, the change was driven by a sharp decline in merchandise exports, reflecting a broader push by Canadian firms to diversify away from the U.S. market.

This trade balance has been in deficit territory for most of the year, with a single marginal surplus recorded in September. The trend coincides with trade uncertainty that began in February 2025, linked to tariffs and policy threats from U.S. President Donald Trump.

Key Export Categories See Major Declines

The November deficit was primarily fueled by a steep fall in several key export sectors, with total export volumes down 0.9%. Imports, by contrast, saw a minimal decrease of only 0.1% to C$66.14 billion.

The most significant drops in exports included:

• Metals and Nonmetallic Goods: This category plummeted by 24.4%, led by a sharp fall in unwrought gold exports to Britain, the United States, and Hong Kong.

• Motor Vehicles and Parts: Exports fell by 11.6%, the largest drop for this category in three years.

The slight decline in overall imports was led by lower imports of motor vehicles, parts, and energy products.

The Complex Picture of U.S. Trade

Despite the widening overall deficit, Canada's trade surplus with the United States actually improved, climbing to C$6.6 billion in November from C$5.2 billion the previous month. This happened because imports from the U.S. fell more steeply (-5.4%) than exports to the U.S. did (-1.8%).

This dynamic reflects the impact of U.S. levies on Canadian steel, automotive, aluminum, and lumber, which have pushed exporters to seek new markets. As a result, the U.S. accounted for just over 68% of Canada's total exports in November, a notable decrease from 76% a year ago.

Diversification Efforts Show Mixed Results

While trade patterns with the U.S. are shifting, Canada's efforts to grow trade with other nations are producing uneven outcomes.

Imports from countries other than the U.S. surged by 7.8% to their highest level on record, with China and Germany leading the trend. At the same time, exports to these non-U.S. destinations fell by 4.9%. This combination widened Canada's trade deficit with the rest of the world to C$8.8 billion in November, up from C$5.6 billion in October.

Expert Outlook and Market Reaction

Stuart Bergman, chief economist at Export Development Canada, suggested that while the diversification effort is moving in the right direction, results will take time. "I do see the momentum moving in the right direction. Are we going to see results overnight? No," he said. Bergman expects exports to the U.S., which have now declined for two consecutive months, to continue shrinking as Canadian firms find new markets.

However, he warned that Canada's exports remain concentrated, with almost 90% still going to the U.S., Britain, the European Union, and China.

Following the data release, the Canadian dollar strengthened, trading up 0.32% to C$1.3511 against the U.S. dollar. Yields on two-year government bonds fell 0.5 basis points to 2.4192%.

Statistics Canada also noted that the release of the November trade data was delayed because a 43-day government shutdown in the United States had impacted data collection for several months.