The escalation in the Middle East following the United States and Israel’s strike on Iran, the continuation of the
war in Ukraine—now in its fourth year—and the expiry of the New START Treaty between Washington and
Moscow together define a context of heightened strategic uncertainty. The increasing polarisation between
geopolitical blocs and the weakening of nuclear arms control frameworks are raising the systemic component of
global risk.
From an economic perspective, the primary transmission channel of these tensions is energy. Brent crude is
trading at around USD 90 per barrel, having incorporated a risk premium associated with the Strait of Hormuz,
while European gas prices have recorded double-digit increases. Although mitigating factors are present—
including alternative export capacity within the Gulf and relatively elevated storage levels in Europe—a
prolonged disruption would reintroduce inflationary pressures at a delicate juncture for advanced economies.
- Across other commodities, copper has stabilised following record highs, underpinned structurally by
electrification trends and constrained supply. Aluminium and nickel are consolidating at elevated levels,
reflecting supply restrictions and demand linked to the energy transition. In precious metals, gold remains
within the USD 5,200–5,400 per ounce range after an exceptional rally in 2025, continuing to function as a
hedge against geopolitical and monetary risk. Agricultural markets display greater heterogeneity, with renewed
upward pressure in wheat and soybeans, alongside marked corrections in cocoa. - In parallel, the trade war has entered a new legal phase following the United States Supreme Court’s
curtailment of the expansive use of executive powers in tariff policy. Nonetheless, the immediate activation of a
temporary 10% global tariff confirms that there has been no substantive de-escalation. - On the monetary front, the major central banks are in a phase of pause or fine-tuning. The European Central
Bank is maintaining the deposit facility at around 2%, with inflation close to target and growth moderate. The
Federal Reserve is holding the federal funds rate within the 3.50–3.75% range, retaining a data-dependent bias
towards further easing. The Bank of England signals additional gradual reductions, while, in contrast, the Bank of
Japan is proceeding with a measured normalisation, with the policy rate at 0.75%. Financial conditions reflect
relative stability: the euro is consolidating around USD 1.17, 12-month Euribor stands at 2.22%, and sovereign
spreads in the euro area periphery remain contained. - From a macroeconomic standpoint, growth remains moderate yet resilient. The United States has begun the
year with expanding activity (ISM manufacturing at 52.6 and housing starts at an annualised 1.48 million), a
robust labour market, and continued indications of a soft landing, although leading indicators point to some
moderation ahead. In the euro area, GDP expanded by 0.3% quarter-on-quarter in Q4 2025, with growth
projected at around 1.2% in 2026 and inflation already close to 2%. At country level, Spain led growth in the
fourth quarter (+0.8% quarter-on-quarter), a relative outperformance expected to persist into 2026.
