Geopolitical tensions seem to have cooled somewhat in recent weeks: the U.S. president is no longer talking about possible operations against Mexico or Colombia, and with Iran, diplomacy seems to have taken precedence. No wonder optimism in gold has faded somewhat, and oil prices have pulled back.
That said, this could simply be the calm before the storm.
When it comes to Tehran, although a new round of nuclear talks with the U.S. is expected this week, it is hard to see Iran agreeing to demands such as exporting all of its uranium stockpiles or dismantling its enrichment infrastructure, and renewed domestic protests could also serve as a pretext for action.
If the U.S. ultimately launches an attack on Iran, the fact that it takes place over the weekend while markets are closed will likely not prevent a risk-off reaction. It would need to be swift, like the one in Venezuela, but that seems unlikely given reports that the U.S. military is preparing for sustained, weeks-long operations.
In such a scenario, oil prices could spike sharply as traders price in the threat to supplies — especially if the Strait of Hormuz were closed, given the region’s outsized role in global energy flows. This kind of risk premium has supported oil moves recently.
If the worst were to happen and Iran retaliated by closing the Strait of Hormuz, panic selling could affect a market already under pressure from AI-related concerns. In that scenario, virtually all assets, including silver and gold, could come under pressure — though silver recent price action shows how volatile it has become. Incidentally, cryptocurrencies could be the hardest hit…
As for the conflict in Ukraine, another round of negotiations is scheduled for February 17 and 18. The fact that talks are continuing is encouraging, but key territorial issues remain unresolved. That makes the prospect of lasting peace in the short term seem quite distant, which is perhaps only good news for defense contractors.
Thus, even with U.S. markets closed today for Presidents’ Day and China celebrating the Lunar New Year, it is unlikely to be a quiet week. Even if geopolitics remain calm, the minutes from the latest Fed meeting, December PCE data, GDP figures, and weekly jobless claims could further sour sentiment.
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