Oil Prices Spike as US-Iran Tensions Flare in Hormuz

The Trump administration is internally discussing plans to formalize a tariff increase on South Korea, a move that would escalate trade tensions between the two allies. Seoul's Trade Minister, Yeo Han-koo, confirmed on Tuesday that U.S. government agencies are consulting on the matter.

The potential action follows a threat from President Donald Trump last week to raise tariffs on Korean goods. The proposed hikes target "reciprocal" tariffs as well as specific levies on automobiles, lumber, and pharmaceuticals, which would jump from 15% to 25%. The administration cited delays in South Korea's legislative process for implementing a bilateral trade deal as the primary reason for the threat.

South Korean Trade Minister Yeo Han-koo speaks to the press at Incheon International Airport about the ongoing trade dispute with the United States.

Trump's Tariff Threat Edges Closer to Reality

Concerns in Seoul are mounting over the possibility that the White House will publish the tariff plan in the Federal Register, the official public record of the U.S. government. Such a step would transform the president's threat into a more concrete administrative action.

"Regarding the issue of putting the tariff plan on the Federal Register, I think that consultations among relevant government agencies are under way," Yeo told reporters. He described the process as a routine administrative procedure but acknowledged that discussions within the U.S. government are ongoing.

Seoul Mounts Diplomatic Push in Washington

In response to the tariff threat, South Korea has launched a diplomatic effort to de-escalate the situation. Minister Yeo arrived in Washington on Friday to dissuade the Trump administration from moving forward.

During his visit, Yeo met with U.S. Trade Representative Jamieson Greer. In their talks, he emphasized Seoul's firm commitment to fulfilling its side of the existing trade agreement, which includes significant investment pledges.

The diplomatic push involves multiple high-level officials. Industry Minister Kim Jung-kwan also met with Commerce Secretary Howard Lutnick, though those discussions reportedly ended without a clear conclusion.

Understanding the Core Trade Commitments

At the heart of the dispute is a trade deal under which Seoul agreed to invest $350 billion in the United States, with an annual cap of $2 billion. In exchange for this and other commitments, Washington agreed to lower its reciprocal tariffs on Korean goods to 15% from 25%.

Minister Yeo suggested that part of the friction may stem from a lack of understanding in Washington about South Korea's political and legislative systems. "I think we might have to continue our outreach to the U.S. as there are aspects of our system that the U.S. side does not fully understand," he noted.

Key Points:

AI-Driven Selloff Pressures Software Sector

Software related stocks got pummeled on Tuesday, as sentiment grew more bearish due to concerns about the impact of artificial intelligence (AI) on the industry. Fears were triggered following a disappointing earnings release from PayPal (PYPL) pre-market. Also, Anthropic released productivity tools for attorneys, which increased selling pressure on related legal publishing and software firms. Risks to the sector have been rising in recent months in anticipation that further advances in AI will cause a greater threat to software business models. Given the sharp declines across the sector, once support is found, buyers may return.

XSW weekly chart shows approach towards long-term uptrend line and 200-day average support (Source: TradingView)

XSW Confirms Head and Shoulders Breakdown

The SPDR S&P Software & Services ETF (XSW) is a proxy for the sector. It broke down from a head and shoulders top reversal pattern last week, on a drop through a swing low at $174.03 and then the neckline of the pattern around $172. Bearish follow-through has been sharp and decisive, leaving little doubt that the sellers are in charge. XSW reached a low of $153.85 on Tuesday. Nonetheless, XSW is rapidly approaching a potentially significant support zone at the convergence of several indicators near $152.

XSW daily chart shows head and shoulders bearish reversal and decline towards support zone. (Source: TradingView)

Support zone converges near $152

When multiple indicators point to a similar price zone, that area can act both as a magnet, pulling price to it, and a strong support zone in the case of XSW. A 78.6% Fibonacci retracement of the previous upswing is at $152.15, and a 141.4% (√2) projection of a bearish measured move points to $152.04. Further, a long-term uptrend line is currently rising through that price zone. If there is an overshoot to the downside, then the 200-day average is at $149.75, providing a lower potential target zone. Since XSW has fallen hard and is very close to that long-term average, it wouldn't be surprising for it to be hit before the current retracement bottoms.

Pattern targets $142–$144 if support fails

The head and shoulders pattern suggests a lower target could be reached. Measuring the pattern provides an initial downside target around $141.79. Of course, that level would be preceded by a failure of support at the uptrend line and 200-day average. That target is derived when using the neckline as the bear trigger. However, if the swing low at $174.03 is used, a target at $144.12 is indicated.

Source: FX Empire

On January 30 2026 our clients was expecting for USDCHF to push higher to terminate red wave c, red wave y, blue wave (iv).

The first chart below was published in our private members area and clearly shows the Elliott Wave count was calling for the red wave c push higher.

The second chart is my buy entry. When the USDCHF pair tagged the bullish FVG zone (Gray Box) I entered the buy trade at 0.7667 with a 29 pip stop loss at 0.7638 and a take profit target at the 2R 0.7725.

Added confirmation for the buy entry was the bullish divergence market pattern (Pink) which formed at the red wave x termination.

USDCHF 1 Hour Chart January 30 2026

USDCHF moves higher and hits 2R target at 0.7725 where I closed buy position for +58 pips and a +2% profit gain. (Risking 1% on every trade)

A trader should always have multiple strategies all lined up before entering a trade. Never trade off one simple strategy. When multiple strategies all line up it allows a trader to see a clearer trade setup.

We at EWF never say we are always right. No market service provider can forecast markets with 100% accuracy. Only thing we at EWF 100%, is that we are RIGHT more than we are WRONG.

Of course, like any strategy/technique, there will be times when the strategy/technique fails so proper money/risk management should always be used on every trade.

Source: Elliott Wave Forecast

The unemployment rate ticked up to 5.4% in the December quarter. The details were positive though, with growth in jobs and hours being outstripped by an even larger rise in participation.

The December quarter labour market surveys showed some early signs of improvement in the jobs market, despite a further small rise in the headline unemployment rate. Wage growth measures remained unsurprisingly subdued at this stage of the cycle.

Overall, we think the results were broadly in line with the Reserve Bank's forecasts and won't give them much new to mull over ahead of their 18 February policy review. What that means is there is little here to hurry the RBNZ quickly towards reversing those last 75bp of OCR cuts made after August 2025. Still muted wage pressures should imply there is time to assess the strength and durability of the recovery before raising rates. We remain comfortable with our forecast of a December 2026 first rate hike.

The number of people employed rose by 0.5% for the quarter – actually more than what was suggested by the Monthly Employment Indicator, and ahead of the 0.3% rise in the working-age population. However, there was an even more significant rise in labour force participation from 70.3% to 70.5%, with the net result being an uptick in the unemployment rate. In any case, both of these 'surprises' are well with the margin of error for this survey, and we don't regard them as being meaningfully different from our expectations.

Another positive indicator from the household survey was a 1% rise in hours worked for the quarter, on top of a 1.1% rise in the September quarter. We certainly wouldn't dismiss this lightly, given that this measure has been an unusually good guide to the swings in quarterly GDP in recent times. However, there was a contrasting 0.5% fall in total hours paid in the business-oriented Quarterly Employment Survey (which had also seen a strong 1.1% rise last quarter).

Given the existing degree of slack in the labour market, wage trends unsurprisingly remained subdued. The Labour Cost Index rose by 0.4% overall for the quarter, with a 0.5% rise in the private sector and a more modest 0.3% rise in the public sector. On an annual basis the LCI rose by 2.0%, its slowest pace since March 2021.

The unadjusted analytical LCI, which includes pay increases that are related to higher productivity, rose by 0.8% for the quarter, slightly more than the 0.7% rise in the September quarter. The annual growth rate slowed from 3.4% to 3.3%, also the lowest reading since March 2021. The distribution of pay rates continues to drift towards annual increases in the 2-3% range, and away from the larger increases that were more common in previous years.

Source: Westpac Banking Corporation

The United States and Israel have kicked off joint naval military exercises in the Red Sea, a clear show of force as diplomatic tensions with Iran continue to build. The war games began on Monday, signaling a coordinated military posture between the two allies amid fears of a potential conflict.

The Israel Defense Forces (IDF) confirmed the exercise on X, stating, "A joint exercise was conducted yesterday between a U.S. Navy destroyer and Israeli Navy vessels." The statement noted that the drill is part of the ongoing cooperation between the Israeli Navy and the US Fifth Fleet. The IDF added that the American destroyer's port visit was a pre-planned, routine part of the "strategic and close cooperation between the two navies."

Figure 1: Joint US-Israel naval exercises in the Red Sea feature advanced warships, signaling a united front amid regional tensions with Iran.

This move comes as the US continues to bolster its military presence in the Gulf region with cargo planes, fighter jets, and advanced air defense systems in preparation for any potential escalation with Iran.

A Backdrop of Regional Military Posturing

The joint drills follow a series of military maneuvers by Iran. In recent days, Iran conducted limited live-fire exercises in the strategic Strait of Hormuz and previously held joint naval operations with China and Russia.

Despite this activity, a fragile de-escalation appears to be in effect. The USS Lincoln carrier group has reportedly moved away from the potential flashpoint and into waters off Yemen, seemingly to lower the temperature ahead of anticipated nuclear negotiations between the US and Iran, which are set to be hosted by Turkey.

The Core Dispute: Nuclear Ambitions and Ballistic Missiles

While Iran has shown willingness to discuss its nuclear program, negotiations are complicated by Washington's maximalist demands. A key sticking point is the US insistence that Tehran curtails or abandons its ballistic missile program—a non-starter for Iranian leaders.

Iran views its missile capability as a critical defensive tool, particularly after being attacked without warning during the June war. Giving up this deterrent would leave the country vulnerable in any future conflict with Israel. This deep-seated distrust is compounded by the Trump administration's unilateral withdrawal from the Obama-era JCPOA nuclear deal, leaving Iran suspicious of US motives.

Complex Alliance Dynamics

Simultaneously, Israeli defense officials have been meeting with top US military leaders, with the Netanyahu government reportedly lobbying the Pentagon for a more robust stance against Iran.

However, an underlying strategic gap may exist between the US and Israeli leadership. One Middle East observer noted a "persistent and unresolved gap between Trump and Prime Minister Netanyahu," which was not closed even during the recent 12-day war.

According to the same analyst, even when President Trump authorized potential strikes in June, his goal was to use military pressure to force Iran into a better deal, not to achieve regime change. Until recently, the overthrow of the Iranian government was not a frequently stated objective from Trump. This nuance highlights the complex and sometimes conflicting strategies at play as all sides navigate the delicate balance between diplomacy and military deterrence.

The UK unemployment rate is on track to hit its highest level since 2015 this year, driven by a sharp increase in labor costs, according to a new forecast from the National Institute of Economic and Social Research (NIESR).

The think tank predicts the jobless rate will average 5.4% in the current year, a notable increase from 4.8% in 2025 and higher than most other economic projections.

Rising Minimum Wage and Taxes Fuel Jobless Rate Spike

A key factor behind the forecast is the mounting cost of hiring workers. "Part of this unemployment story in the UK is rising labour costs," explained NIESR economist Ben Caswell.

According to the institute's analysis, the cost of employing an entry-level worker surged by 10.6% last year. This was fueled by two main drivers:

• A rising minimum wage: Recent government policy has pushed the minimum wage to two-thirds of median earnings.

• Higher employer taxes: An increase in social security contributions last year added to the financial burden on companies.

NIESR found a direct correlation between these costs and job figures. "Industries which have a larger share of their workforce on the minimum wage have also experienced larger increases in their respective unemployment rates," Caswell noted.

The pressure on employers is set to continue, with Britain's minimum wage scheduled to rise by another 4% in April. Prime Minister Keir Starmer's government also plans to continue phasing out the lower minimum wage rates for 18-20 year-old workers, further standardizing labor costs.

Tech Sector Headwinds and Shifting Labor Force Dynamics

NIESR's analysis also identified emerging weakness in the IT sector, where a rise in unemployment may be linked to the adoption of artificial intelligence reducing the demand for certain entry-level positions.

However, the think tank clarified that the rising unemployment rate isn't solely due to a lack of job vacancies. The labor pool itself is expanding. More people who were previously considered economically inactive—neither working nor looking for a job—are now seeking employment. This trend, which follows a post-pandemic rise in inactivity rates, is increasing the number of people officially counted as unemployed.

Long-Term Outlook and Bank of England Rate Cut Predictions

Looking ahead, NIESR projects the unemployment rate will likely fall to 5% by 2028 or 2029, which it considers a sustainable long-term level outside of an economic boom. This comes after the official unemployment rate hit a nearly 50-year low of 3.8% in 2022 and 2019, though the survey used for that data is currently being overhauled due to quality concerns.

Alongside its unemployment forecast, NIESR also revised its economic growth projections for 2026 and 2027 upward to 1.4% and 1.3%, respectively. The institute anticipates two interest rate cuts from the Bank of England this year, which would lower the benchmark rate from 3.75% to 3.25%.

This prediction is more aggressive than the market consensus. Economists surveyed by Reuters do not expect the first rate cut to occur before March at the earliest. The Bank of England is scheduled to release its own updated economic forecasts on Thursday.