Trump's Greenland Tariffs Could Roil EU and US Markets

A diplomatic rift has emerged between Israel and the United States after Prime Minister Benjamin Netanyahu’s government publicly objected to the makeup of a new Gaza advisory panel announced by the White House. Netanyahu convened a Sunday meeting with his ruling coalition partners to address the dispute.

The disagreement centers on the "Gaza Executive Board," an advisory body established this week as part of President Donald Trump's 20-point plan for ending the war in Gaza.

US Unveils Post-War Governance Structure

The White House outlined a three-tiered structure for managing post-war Gaza:

1. Board of Peace: A high-level body chaired by President Trump himself.

2. Palestinian Technocratic Committee: A group tasked with the direct governance of Gaza, which held its first meeting in Cairo on Saturday.

3. Gaza Executive Board: An advisory body designed to support the other two entities.

The executive board's membership includes Turkish Foreign Minister Hakan Fidan and Qatari diplomat Ali Al-Thawadi, alongside other regional and international officials. President Trump has also invited Turkish President Recep Tayyip Erdogan to join the overarching Board of Peace.

Israel Voices Strong Opposition

Late Saturday, Netanyahu's office issued a sharp rebuke of the advisory panel's composition.

"The announcement regarding the composition of the Gaza Executive Board... was not coordinated with Israel and runs contrary to its policy," the statement declared. It confirmed that the Prime Minister had instructed his Foreign Affairs Minister to raise the issue directly with the US Secretary of State.

While the official statement did not specify the reason for the objection, Israel has consistently opposed any post-war role for Turkey in Gaza. Relations between the two nations have deteriorated significantly since the war began in October 2023, following the Hamas attack that triggered Israel's military offensive.

Netanyahu Convenes Coalition Partners

In response to the White House announcement, Netanyahu scheduled a meeting for his coalition leaders at 10:00 a.m. Sunday to review the executive board's membership. A spokesman for Netanyahu's Likud Party confirmed the meeting but declined to offer further details.

Netanyahu's governing coalition includes far-right partners such as the Religious Zionist Party, led by Finance Minister Bezalel Smotrich, and Otzma Yehudit (Jewish Power), led by National Security Minister Itamar Ben Gvir.

These diplomatic developments coincide with a statement from the United States this week that the Gaza truce plan has entered its second phase, shifting focus from a ceasefire to the disarmament of Hamas.

Oil prices are facing growing fundamental pressure as a potential global oversupply emerges, driven by slowing stockpiling in China and the rise of electric vehicles. While these long-term factors point to weakness, immediate supply risks are keeping a risk premium baked into the market.

Analysts at ING Group note that even as tensions surrounding Iran appear to ease, the underlying supply risks have not disappeared, creating a complex outlook for traders.

Geopolitical Swings Dictate Near-Term Prices

The oil market is currently reacting to every development out of Iran. Earlier this week, Brent crude oil surged to nearly $67 per barrel, its highest level since early October.

However, prices fell by $3 on Thursday after statements from US President Donald Trump suggested a reduced chance of immediate military intervention. By Friday, oil had recouped some of those losses as uncertainty about Iran and its impact on supply lingered.

The initial price drop was a direct response to the US holding back from immediate action against Iran, despite ongoing domestic protests there. Rising speculation about a potential military response from the Trump administration had previously fueled fears of a disruption not just to Iranian oil, but to supplies across the entire Persian Gulf.

Escalation Risk and the Strait of Hormuz

According to Commerzbank AG commodity analyst Barbara Lambrecht, the situation still carries a significant risk of escalation. A key concern is the potential loss of Iranian exports, which reached nearly 1.9 million barrels per day this past fall, according to Bloomberg.

The primary fear is an Iranian blockade of the Strait of Hormuz if tensions flare up. This critical chokepoint handles roughly a quarter of the world's seaborne oil supply.

"Any escalation with Iran will also raise concerns about potential disruption to oil flows through the Strait of Hormuz, a chokepoint where around 20m b/d passes," said Warren Patterson, head of commodities strategy at ING Group.

While the immediate risks have eased, they remain significant enough to keep the market on edge. If a more sustained de-escalation occurs, market focus will likely shift to developments in Venezuela, where sanctioned or blocked oil is expected to gradually re-enter the global market.

Market Fundamentals Poised to Retake Focus

Next week, the International Energy Agency's (IEA) monthly report is expected to pull attention back toward the market's underlying fundamentals. This follows a week where new forecasts from the US Energy Information Administration (EIA) and OPEC were largely overshadowed by the Iran crisis.

The EIA and OPEC now have similar forecasts for global oil demand growth, with both providing an initial outlook for 2027. However, the IEA is expected to maintain a more cautious view, likely continuing its prediction of a significant oil market oversupply this year.

"The decisive factor for the oil price is the extent to which this oil flows into the world markets and becomes visible in swelling inventories," Lambrecht noted.

Long-Term Outlook: China, EVs, and Oversupply

On the fundamental side, China appears to have drawn down its reserves last year to accumulate large stockpiles, absorbing much of the global glut. In contrast, inventory levels in Organization for Economic Cooperation and Development (OECD) countries remain within their typical range.

Lambrecht suggests the fundamental outlook could turn bearish if a larger portion of overproduced oil is directed toward industrialized nations. This could happen if China reduces its stockpiling efforts—a scenario made more likely by the rising adoption of electric vehicles, which curbs the country's overall oil demand.

Patterson of ING believes that the longer the rhetoric around Iran continues without direct US intervention, the more the geopolitical risk premium will fade. This would allow more bearish fundamentals to reassert control over pricing.

Despite ING’s bearish market outlook, the prompt ICE Brent timespread is showing strength, indicating tightness in the spot market. "The spread held up relatively well yesterday despite weakness in the flat price," Patterson said. This tightness is likely due to a decline in Kazakh oil flows from the CPC terminal.

At the time of writing, West Texas Intermediate (WTI) crude was trading at $59.91 per barrel, up 1.2%, while Brent crude was at $64.50 per barrel, also 1.2% higher.

A top European Central Bank official has issued a stark warning, stating that policymakers should not be "naive" and must recognize that Europe is already "at war" with Russia. Martins Kazaks, a member of the ECB's Governing Council, urged central banks to prepare for further escalation of the conflict.

In an interview with the Financial Times, Kazaks argued that while the conflict is not "physically on our ground," Europe is actively engaged through other means. He pointed to cyber attacks and the sabotage of undersea cables in the Baltic Sea as clear evidence of this ongoing confrontation, stressing that the continent must "be resilient to deal with that."

Financial Stability and Debt Under Threat

Kazaks outlined the potential economic fallout if a military conflict were to directly involve a euro-area member. Such a scenario could trigger significant "financial stability issues" and raise serious concerns about the sustainability of national debt.

However, he emphasized that these risks are currently "marginal." He also expressed confidence that the European Union has the capacity to address such challenges if they were to arise.

A Strategy to Prevent Direct Conflict

To reduce the risk of a direct military clash, Kazaks proposed a two-part strategy. He advised that Europe should:

1. Support Ukraine to a degree that ensures Moscow "does not win."

2. Bolster its own military forces to create a credible deterrent against further aggression.

Kazaks' Bid for ECB Leadership

These comments come as Kazaks positions himself as a contender to become the next ECB vice president, seeking to replace Luis de Guindos when his term concludes in May.

The selection process involves a decision by euro-area finance ministers, which could be delayed due to an unusually high number of candidates. The chosen nominee will then face a hearing at the European Parliament and be consulted on by the ECB's Governing Council before European Union leaders make the final appointment.

Donald Trump’s threat to levy tariffs on key European allies, including the UK, unless a deal is struck for the US to purchase Greenland has sparked a sharp and unified backlash from his traditional supporters on the British political right.

Leaders from both the Conservative and Reform UK parties have publicly criticized the US president's move, aligning their positions with the UK government led by Prime Minister Keir Starmer.

Conservatives Decry "Outrageous" Tactics

Senior Conservative figures were swift to denounce the tariff threat. Party leader Kemi Badenoch posted on X that it was "completely wrong to announce tariffs on the UK over Greenland," directly echoing the language used by the Prime Minister.

Jeremy Hunt, a former Conservative foreign secretary, offered a blunter assessment, telling the BBC that the threat is "what happens when Donald Trump thinks you are weak." He described the tactic as "an outrageous way to treat a NATO ally." Hunt argued that the only way for the UK to maintain control of its destiny and prevent such actions is to ensure it can defend itself.

Reform UK Criticizes Methods, Not Motives

Criticism also came from Reform UK, a party whose leader, Nigel Farage, is known for his close relationship with Trump.

Richard Tice, Reform UK's Deputy Leader, told the BBC that Trump "has got it wrong." While Tice agreed with the underlying objective of securing Greenland for NATO allies, he stated, "the way that he's going about it is totally wrong." He called on Prime Minister Starmer to open negotiations with the United States.

Zia Yusuf, Reform's head of policy, voiced economic concerns in an interview with ITV. "Bigger tariffs on this country will make it even harder for British manufacturers, even harder for British workers," Yusuf said, adding he was "very concerned" about the potential impact.

When asked if Farage should leverage his relationship with Trump to advocate for the UK, Yusuf noted that while he was sure Farage would do so if requested by the government, the responsibility lies elsewhere. "It's not his place to do that. It's up to the prime minister to make that call," Yusuf said.

The Tariff Ultimatum Explained

On Saturday, Trump announced a plan to impose a 10% tariff on eight European nations, including the UK and Denmark, starting February 1. The rate is set to increase to 25% in June.

The move is a response to the nations' plans to conduct NATO military exercises in Greenland, which Trump views as a token gesture. He has publicly stated that bringing Greenland under US control is essential to Western national security, citing perceived threats to the island from Russia and China.

Prime Minister Starmer addressed the issue on Saturday, stating that Greenland's future "is a matter for the Greenlanders and the Danes." He affirmed the UK's position, saying, "Applying tariffs on allies for pursuing the collective security of NATO allies is completely wrong. We will of course be pursuing this directly with the US administration."

Italian Prime Minister Giorgia Meloni has labeled U.S. President Donald Trump's threat to impose tariffs over his Greenland plan a "mistake," confirming she has personally communicated her concerns to him.

Speaking to journalists during a visit to Seoul on Sunday, Meloni stated, "I believe that imposing new sanctions today would be a mistake." She added, "I spoke to Donald Trump a few hours ago and told him what I think."

Italian Prime Minister Giorgia Meloni addresses the press in Seoul, where she detailed her opposition to potential U.S. tariffs over the Greenland issue.

Framing the Dispute as Miscommunication

Despite her direct opposition to the tariffs, the far-right prime minister, who is considered a Trump ally in Europe, attempted to de-escalate the conflict. She suggested to reporters that "there has been a problem of understanding and communication" between the United States and Europe regarding the autonomous Danish territory.

Meloni noted that from the American perspective, the signals coming from Europe were unclear. "It seems to me that the risk is that the initiatives of some European countries were interpreted as anti-American, which was clearly not the intention," she explained, without specifying which initiatives she was referring to.

A Call for NATO Intervention

Meloni argued that NATO is the appropriate venue for resolving the growing crisis. She reported speaking with the NATO secretary general, who confirmed the alliance is beginning to work on the matter.

"NATO is the place where we must try to organise together deterrents against interference that may be hostile in a territory that is clearly strategic," she said. "I believe that the fact that NATO has begun to work on this is a good initiative."

Trump's Tariff Threats Explained

The dispute centers on Trump's moves related to Greenland, which he claims is essential for U.S. national security. In response to European objections, Trump has threatened to impose tariffs of up to 25% on all goods imported into the U.S. from several key nations:

• Denmark

• Norway

• Sweden

• France

• Germany

• The United Kingdom

• The Netherlands

• Finland

The Netherlands' foreign minister has labeled U.S. President Donald Trump's threat to impose new tariffs on European allies as "blackmail." The move is designed to pressure several nations into facilitating the sale of Greenland to the United States.

Dutch Foreign Minister David van Weel characterized President Trump's tariff threat as a form of blackmail that undermines the NATO alliance.

"It's blackmail what he's doing," Foreign Minister David van Weel said during an interview on Dutch television. "And it's not necessary. It doesn't help the alliance (NATO) and it also doesn't help Greenland."

Trump's Tariff Ultimatum

In a post on Truth Social, President Trump announced that additional 10% import tariffs would take effect on February 1. The tariffs target goods from eight European countries that have committed personnel to a NATO exercise on Greenland:

• Denmark

• Norway

• Sweden

• France

• Germany

• The Netherlands

• Finland

• Great Britain

Strategic Tensions Over Greenland

Van Weel argued that connecting trade policy to the Greenland issue was inappropriate. He explained that the NATO mission was intended to demonstrate Europe's commitment to defending the island, not as a bargaining chip for its sale.

President Trump has insisted on achieving full U.S. ownership of Greenland, which is an autonomous territory of Denmark. He cites the island's strategic location and mineral deposits as vital to American security.

However, leaders in both Denmark and Greenland have firmly stated that the island is not for sale and does not wish to become part of the United States.

European Union Prepares a Response

In response to the escalating trade tensions, ambassadors from the 27 European Union member states are set to convene for an emergency meeting on Sunday. The primary agenda will be to formulate a unified response to Trump's tariff threat.