US and Iran to Hold Talks Amid Fears of New Mideast War

Source: Poundsterlinglive

The Trump administration is deploying nearly $12 billion to establish a strategic reserve of rare earth elements, creating a national stockpile designed to challenge China's dominance over the critical metals market.

Announced by President Donald Trump on Monday, the initiative, dubbed "Project Vault," aims to protect U.S. manufacturers in the automotive, electronics, and defense sectors from future supply chain disruptions.

President Donald Trump announces the 'Project Vault' initiative for a strategic rare earths reserve from the Oval Office.

The Strategic Rationale for a National Stockpile

The move is a direct response to trade tensions last year, during which the Chinese government restricted exports of rare earths—essential components for everything from jet engines and radar systems to electric vehicles and smartphones.

"We don't want to ever go through what we went through a year ago," Trump stated, alluding to the trade showdown with China. He added that the situation "did work out" in the end.

This new reserve functions similarly to the national petroleum reserve, creating a buffer against geopolitical leverage. China currently accounts for approximately 70% of the world's rare earths mining and a staggering 90% of global processing, giving it significant control over the supply chain.

Funding and Financial Structure

"Project Vault" will be seeded with significant government and private-sector funding:

• A $10 billion loan from the U.S. Export-Import Bank.

• Nearly $1.67 billion in private capital.

The government-backed loan has a 15-year term. President Trump noted that he expects the government to ultimately profit from the loan used to start the reserve.

This financial commitment builds on previous U.S. government support for the sector, which includes stakes in the rare earths miner MP Materials and financial backing for companies like Vulcan Elements and USA Rare Earth.

Diplomatic and Industry Collaboration

The strategic reserve is set to be a central topic at an upcoming ministerial meeting on critical minerals hosted by Secretary of State Marco Rubio on Wednesday. Vice President JD Vance is scheduled to deliver the keynote address to officials from several dozen European, African, and Asian nations.

According to a statement from the State Department, the meeting aims to "create momentum for collaboration" among participating nations to secure reliable access to rare earths. Several bilateral agreements to coordinate and improve supply chain logistics are also expected to be signed.

President Trump announced the initiative from the Oval Office, joined by General Motors CEO Mary Barra and mining industry billionaire Robert Friedland, alongside other administration officials and congressional leaders. The creation of the reserve was first reported by Bloomberg News.

Markets

The (USD) debasement trade last week was mainly driven by longer-term structural and (geo)political considerations. However, yesterday, for once, (US) eco data also again had a role to play.

The US January manufacturing ISM delivered an upward surprise that was too big to ignore. The headline index jumped from 47.9 to 52.6 (48.5 expected). It was the first 50+ reading since January last year and the best level since August 2022. Almost all subindices supported the improvement (production 55.9 from 50.7; orders 57.1 from 47.4; backlog of orders 51.6 from 45.8). The employment series also improved but at 48.1 stayed below the 50-mark. The prices paid stayed at a high 59.

The figure needs confirmation from tomorrow's services ISM, but it provides additional evidence that the US economy for now doesn't need 'emergency monetary support', leaving the Fed in a good place to wait and see. US yields already were upwardly oriented (Warsh-driven?) going into the release and extended gains afterward. Yields closed the session 4-5 bps higher across the curve. The Treasury's estimated borrowing needs were published later in the session but didn't yield any major surprise ($574 bln borrowing this quarter from an estimated $578 set in November, including a higher $850 bln cash pile at the start; and $109 bln borrowing in Q2). The Q4 cash flow performance was $42 bln better than expected. German Bund yields followed the US move at a distance with yields rising 2-3 bps across the curve. The data also rubberstamped the intraday comeback of the USD dollar. EUR/USD closed the session at 1.179 (from 1.1856). DXY rebound further to 97.63. Both US and European equities apparently enjoyed renewed dip buying (S&P 500 +0.54%, less than 0.5% from all-time record; Eurostoxx 50 +1%). Metals including Gold, Silver and Copper were/are looking for a bottom.

This morning, (Asian) equity markets show an outright risk-on sentiment (Nikkei +3.92%; Kospi +6.84%, Nifty 50 + 2.97%). A positive risk sentiment and metals rebounding currently caps further USD gains (EUR/USD 1.181, USD/JPY 155.4). Risk sentiment probably will continue to set the tone for lobal trading today. The eco calendar is almost empty. The release of the US JOLTS Labour market data is delayed by the (partial) US government shutdown. We keep a close eye at the 'balance' between commodities/metals and the Dollar. Maybe the latter is a bit better protected against a (potential) new upleg in metals as US eco data improve further.

News and views

There it is the first rate hike by a central bank in an advanced economy. The Reserve Bank of Australia (RBA) hiked the policy rate by 25 bps to 3.85% this morning. Motivation was straightforward: "A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025.

While part of the pick-up in inflation is assessed to reflect temporary [e.g. the expiry of state electricity rebate schemes] factors, it is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight." Headline inflation increased to 3.6% y/y in 2025Q4 while underlying gauges accelerated to 3.4%. Both were (substantially) higher than the RBA expected. Strong upward revisions result in CPI not returning to the 2-3% target before mid-2027. GDP grew at around potential in 2025Q3 (2.1%) and probably quickened in the final quarter thanks to strong private demand. Consumption growth picked up by "much more" than expected in the November statement. The Aussie dollar jumped back above AUD/USD 0.70 after losing that handle in the recent US dollar recovery. The combo is trading around the strongest levels since early 2023. Australian swap yields rise 2.4-7 bps in a bear flattening move though gains (at the front) had been higher earlier (>10 bps). Money markets assume another rate hike at the June meeting (90%).

The US will cut tariffs on Indian imports to 18% from 50%, President Trump announced yesterday. Indian exports suffered from the punitive rate of which 25 ppts was introduced in response to India buying Russian crude. The US president said India would no longer buy Russian oil and instead agreed to potentially buy more oil from Venezuela. PM Modi confirmed the trade deal but stayed silent on the oil topic. Trump claimed India would buy over $500bn in American goods (over 5 years).

Annual amounts last year only totaled $40bn+ while total bilateral trade only amounted to $212bn in 2024. Either way, the trade détente supports the Indian rupee which had been hitting record lows the last couple of weeks. USD/INR gaps lower to 90.43 from 92 just a couple of days ago. Indian stock markets rise more than 3%.

Source: KBC Bank

Key Points:

Market Overview

Oil and natural gas prices are falling as geopolitical tensions ease, removing recent risk premiums and shifting focus back to strong supply. WTI crude is now around $61 to $62 per barrel, down from late January highs of $65 to $66, after dropping nearly 5% in one day earlier this week.

A stronger US dollar is adding pressure, and OPEC+ has confirmed it will keep output steady, supporting the view that global supply will remain high. With demand growth expected to stay below 1 million barrels per day in 2026 and inventories likely to rise, prices are now testing important support near $60.

Volatility is still high, but the market has clearly moved from risk-driven rallies to a more cautious, balanced approach.

Natural Gas Forecast: $3.20 Holds as Price Pulls Back Within Rising Channel

Natural Gas (NG) Price Chart

Natural gas is trading near $3.23, easing after failing to hold above the recent swing high near $3.55. On the 2-hour chart, price remains inside a rising channel, but recent candles show smaller bodies and lower highs, pointing to short-term consolidation. The pullback has brought price back toward the 50-EMA, which is flattening and acting as near-term support.

The broader trend stays constructive as long as price holds above $3.10–$3.15, a zone aligned with prior resistance turned support. The 200-EMA near $2.60 continues to slope higher, reinforcing the medium-term uptrend. The RSI around 40–45 shows cooling momentum, not aggressive selling.

Trade idea: Buy dips near $3.15, targeting $3.55, invalidated below $3.00.

WTI Crude Oil Forecast: $61.80 Holds After Channel Breakdown—What's Next?

WTI Price Chart

WTI crude oil is trading near $61.80, consolidating after a sharp rejection from the upper boundary of a rising channel. On the 2-hour chart, a strong bearish engulfing candle marked the breakdown below the channel midline, signaling a shift from momentum buying to profit-taking. Price is now below the 50-EMA, while the 200-EMA near $61.00 is acting as near-term support.

Former resistance around $63.70–$64.00 has turned into a supply zone. The RSI near 40 shows weak momentum, suggesting sellers still control the pace but without panic selling. A clean break below $61.00 could open room toward $60.20, while recovery needs a move back above $62.50.

Trade idea: Sell rallies near $62.50, targeting $60.20, invalidated above $63.80.

Brent Crude Forecast: $66 Holds as Bulls Lose Control Below Rising Channel

Brent Price Chart

Brent crude is trading near $66.00, moving sideways after a sharp rejection from the top of a rising channel. On the 2-hour chart, a strong bearish candle broke price below the channel support and the 50-EMA, signaling a loss of upside momentum. Since then, candles have been smaller, showing consolidation rather than a quick rebound.

The area around $66.80–$67.00 now acts as resistance, while the 200-EMA near $65.50 is providing short-term support. A break below $65.40 could open the door toward $64.25, a prior demand zone. The RSI near 40 reflects weak momentum, suggesting sellers remain in control without extreme pressure.

Trade idea: Sell rebounds near $66.80, targeting $64.30, invalidated above $67.90.

Source: FX Empire

Deutsche Bank downgraded Merck KGaA (ETR:MRCG) to "hold" from "buy" and raised its price target to €132 from €127, citing reduced earnings expectations and limited upside after a recent share price recovery, sending shares down over 3%.

In a note ahead of the company's upcoming fourth-quarter results and 2026 guidance, analyst Falko Friedrichs said Deutsche Bank cut its adjusted earnings per share estimate for 2026 by about 5%.

The reduction reflects higher foreign exchange headwinds and slightly higher interest costs than previously assumed, according to the report.

Deutsche Bank said it expects the fourth-quarter results to be largely a non-event, with investor attention likely centered on the 2026 guidance.

The brokerage said the guidance is likely to indicate another operational transition year. Friedrichs noted that the revised adjusted EPS forecast is 7% below Bloomberg consensus for 2026 and as much as 10% below consensus for the outer years.

The downgrade was driven by the gap between Deutsche Bank's estimates and consensus forecasts, as well as valuation considerations.

Friedrichs said the revised €132 target price no longer offers significant upside following a roughly 15% recovery in the share price in recent weeks. Deutsche Bank said it is waiting for a better entry point and for consensus estimates to be reset.

Source: Investing

Russia has signaled it is prepared for a "new reality" where no nuclear arms control treaty exists with the United States, as the landmark New START agreement is set to expire this week.

Without a last-minute deal, the expiration on Thursday will remove all constraints on the long-range strategic nuclear arsenals of both nations for the first time in over half a century.

"This is a new moment, a new reality—we are ready for it," Russian Deputy Foreign Minister Sergei Ryabkov, Moscow's lead arms control negotiator, told Russian news agencies. He made the comments during a visit to Beijing for "strategic stability consultations."

The New START treaty, signed in 2010, limits each country to a maximum of 1,550 deployed strategic warheads.

US Silence Signals Treaty's Demise

Last month, U.S. President Donald Trump suggested he would let the treaty lapse. His administration has not formally replied to a Russian offer to maintain the pact's missile and warhead limits for another year, which would have provided time to negotiate a successor agreement.

"The lack of an answer is also an answer," Ryabkov was quoted as saying by the TASS news agency.

Arms control advocates in both Moscow and Washington warn that the treaty's end will do more than just remove warhead limits. It is also expected to erode confidence, undermine trust, and eliminate the ability to verify the nuclear intentions of the other side. Many experts now fear the possibility of an unrestrained nuclear arms race.

The Broader Collapse of Arms Control

The network of agreements designed to prevent nuclear war, painstakingly built since the 1962 Cuban Missile Crisis, has been steadily deteriorating. This trend is accelerating amid growing confrontation between Russia and the West over Ukraine and U.S. concerns about China's growing arsenal.

The United States has proposed that China, the world's third-largest nuclear power, should be included in future arms control negotiations. However, Beijing has shown no interest in participating. Ryabkov stated that China has a clear position on the matter and that Moscow respects it.

Warnings of a New Arms Race

Former U.S. President Barack Obama, who signed the New START treaty with then-Russian President Dmitry Medvedev in 2010, called on the U.S. Congress to take action.

"If Congress doesn't act, the last nuclear arms control treaty between the U.S. and Russia will expire," he said on X. "It would pointlessly wipe out decades of diplomacy, and could spark another arms race that makes the world less safe."

Medvedev echoed these concerns, stating that the world should be alarmed if the treaty expires without a clear path forward, suggesting it would advance the "Doomsday Clock."

In a sign of escalating military calculations, Ryabkov also noted that if the U.S. were to place missile defense systems on Greenland, an autonomous territory of Denmark, Russia would be forced to take compensatory military measures.