Crude rises amid US tariffs on Iran’s partners

Today’s headlines

What’s happening: Crude oil prices rose on Monday after US President Donald Trump announced fresh tariffs on Iran’s trading partners.

What happened: Trump announced plans to impose 25% tariffs on goods from any country doing business with Iran.

However, prospects of higher supply from Venezuela limited the overall gains in crude prices.

Why it matters: Trump’s tariffs on countries doing business with Iran increased pressure on the Middle East nation following widespread domestic protests. The US President said that the tariffs would come into immediate effective but did not disclose any further details.

Trump also warned of a possible military action against Iran, raising concerns around a potential disruption in oil exports from the country, which is a major source of global oil supply.

Adverse weather impacting Kazakhstan’s oil output and Ukraine’s drones damaging Russian infrastructure lent further support to oil prices. A recent report from Azerbaijan’s energy ministry said that oil exports from the country fell to 23.1 million tonnes last year, from 24.4 million tonnes in 2024. Both Russia and Azerbaijan are OPEC+ members.

Trump also announced a criminal investigation into Federal Reserve Chairman Jerome Powell, increasing pressure on the central bank to cut interest rates. Lower rates tend to boost economic growth by lowering borrowing costs, which in turn raises the demand for fuel.

Weakness in the US dollar also provided a boost to oil prices on Monday, as a softer greenback makes commodities cheaper for foreign currency holders.

Venezuela is gearing up to resume oil exports, which had stopped after President Nicolas Maduro was kidnapped by US military forces.

Brent crude jumped 0.8% to close at $63.87 per barrel on Monday, while WTI crude gained 0.6% to finish at $59.50 per barrel.

What to watch: Investors will keep an eye on the situation in Iran. Markets will also monitor the Russia-Ukraine war and the US-Venezuela tensions as well as the Fed’s monetary policy decision.

Goldman Sachs said ‍that crude oil prices are expected to drift lower in 2026 due to the availability of new supply resulting in a market surplus.

Data on US EIA (Energy Information Administration) crude oil stockpiles, due to be released on Wednesday, will also remain in focus. US crude inventories declined by 3.831 million barrels to 419.1 million barrels in the week ended January 2, versus market estimates of a gain of 1.1 million barrels.

The markets today

The Japanese yen in focus today ahead of some major economic reports this week

Context: The USD/JPY forex pair rose this morning as investors digested the latest economic data from Japan.

Details: Data released this morning showed Japan’s current account surplus widened to ¥3,674.1 billion in November from ¥3,338.9 billion in the year-ago month. The figure topped market estimates of ¥3,594 billion. The goods account surplus rose to ¥625.3 billion in November, from ¥119.1 billion, as exports grew 5.1% while imports declined 0.5%.

Japan’s bank lending jumped 4.4% in December, following a 4.1% gain in the previous month and topped market estimates of a 4.1% gain. This marked the fastest growth since April 2021.

The Japanese yen came under pressure, falling to its lowest reading in a year amid rising political concerns over Prime Minister Sanae Takaichi dissolving the parliament as early as next month.

Investors remained divided on the prospects of another interest rate hike by the Bank of Japan, with the latest reports presenting a mixed picture of the Japanese economy.

Strength in the US dollar also weighed on the Japanese currency this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 98.97.

The USD/JPY pair gained around 0.4% to 158.73 this morning, while the Nikkei 225 jumped 3.08% to 53,540.60.

What to watch: Investors await the release of economic data on machine tool orders, due on Wednesday, and PPI, due on Thursday. Japan’s producer prices, which surged 2.7% year-over-year in November, are expected to rise by 2.4% in December. Japan’s machine tool orders jumped 14.2% year-over-year to ¥136,291 in November.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.17%, 0.16% and 0.08%, respectively.

The news shaping the markets

Russian forces announced an air attack on Kyiv overnight on Monday. The news sent the USD/RUB pair lower in forex trading this morning.

The Philippines’ net direct investment tumbled by 39.8% year-over-year to $0.6 billion in October, following a sharp decline in debt instruments, which lent support to the USD/PHP forex pair.

Ireland’s AIB construction PMI rose to 48.4 in December from 46.7 in the previous month. However, the latest reading signalling the eighth straight month of contraction sent the EUR/USD pair lower in forex trading this morning.

The New Zealand Institute of Economic Research’s survey of business opinion showed a surge in business confidence to its strongest level since March 2014 during the fourth quarter of 2025, which lent support to the NZD/USD forex pair.

UK’s retail sales climbed 1% year-over-year in December, topping market estimates of a 0.6% gain, which sent the GBP/USD pair higher in forex trading this morning.

What else to watch today

Spain’s 12-month Letras auction (1340 UAE Time) and 6-month Letras auction (1340 UAE Time), UK’s Index-linked Treasury Gilt 2035 auction (1400 UAE Time), Italy’s 3-year BTP auction (1410 UAE Time), Germany’s 5-year Bobl auction (1430 UAE Time), US NFIB business optimism index (1500 UAE Time), ADP employment change weekly (1715 UAE Time), inflation rate (1730 UAE Time), Redbook index (1755 UAE Time), new home sales (1900 UAE Time), RCM/TIPP economic optimism index (1910 UAE Time), 30-year bond auction (2200 UAE Time) and monthly budget statement (2300 UAE Time), Canada’s building permits (1730 UAE Time), as well as Argentina’s inflation rate (2300 UAE Time).