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Weekly Perspectives: What could unsettle financial markets?

Anthony Willis

Senior Economist, Multi-Asset Solutions team

Key Takeaways

It has been a busy start to the year from a geopolitical perspective. Despite uncertainty, markets remain largely untroubled.
Discussions are underway around how the US can tap into Venezuela’s oil reserves. Required investments will be significant and it will take time for new supplies to come online. The oil price ticked up at the end of last week.
Events in Iran are escalating, and the US has ramped up rhetoric about intervention. Should that happen, tensions will increase, and retaliation would likely dampen the market mood.
News emerged over the weekend that the US justice department has opened a criminal investigation into Jerome Powell. Any real or perceived threats to Federal Reserve independence would cause a reaction in markets. Gold and Silver have trended higher post the announcement.
The economic outlook and prospects for corporate earnings remain positive. Broader events, however, have scope to destabilise sentiment and volatility could increase. We are monitoring events closely.

Transcript

In terms of geopolitical newsflow it has been a very busy start to 2026. We have seen attention on Venezuela, Iran and Greenland to name but a few. Thus far, however, financial markets remain untroubled.

Just over a week on from the US’s removal of Venezuela’s President Maduro, we are now seeing talks taking place between US oil companies and US President Trump about what comes next. There appears to be no desire from the US government do anything other than let new Venezuelan president, Delcy Rodriguez, have control of the country – albeit with the underlying threat of intervention. It will take a significant amount of time for US oil company investments to increase supply from Venezuela. It will also require significant capital expenditure and political stability will be needed before huge amounts of US dollars are committed to the region. The oil price rose at the back end of last week on the expectation that this is going to be a very long process.

Events in Iran are in the headlines – the protests started in late December with shops closing in protest at cost-of-living issues. The Iranian rial currency has devalued by about 40% since last summer and the unrest now appears to be broadening out into wider protests against the government. The uprising is pushing for real change and events are turning violent. The US has talked about intervening – if that happens then the market mood may well deteriorate. Escalation would be a significant risk with Iran likely to retaliate against both the US and Israel.

Turning to Greenland – there should be plenty of scope for compromise on the basis that, while Greenland is an autonomous territory, it is ultimately part of Denmark and therefore NATO. As such it is already an ally of the US. The States have had a military base in Greenland for more than 70 years. Although it currently only has about 200 service personnel on the ground, historically it has stationed 10,000 troops there and can easily ramp up numbers if they really are concerned about China and Russia having more of an influence on the Arctic region.

More concerning is news emerging over the weekend that the Federal Reserve (Fed) Chair, Jay Powell, faces a criminal indictment over allegations of misleading Congress regarding cost overruns around the refurbishment of the Fed building. This is probably the most immediate market threat in terms of sentiment. We have seen in the past how any worries over its independence will not be taken well by financial markets. Powell pushed back strongly and suggested this is nothing to do with cost overruns and potential fraud and everything to do with keeping pressure on for further interest rate cuts. A perceived lack of Fed independence is trouble for financial markets, and we have seen that already with higher prices for both gold and silver.

In summary, the economics backdrop is OK and expectations for the looming corporate earnings season remain anchored around another strong set of announcements. Equity markets have proven resilient so far, but it is early days. My view is that as long as the focus remains on the economy and earnings then things should be fine. If political worries or concerns re-emerge about the Fed’s independence, however, then market sentiment could become destabilised. If that happens, we may well see a little more volatility in markets.

12 January 2026

2026年 January 12日

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Weekly Perspectives: What could unsettle financial markets?

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Weekly Perspectives: What could unsettle financial markets?

Weekly Perspectives: Will the latest geopolitical shock derail markets?

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