Geopolitical turmoil impacts the market: Middle East tensions escalate, dragging down commodities, precious metals face "Black Monday"

Year-end market volatility, with multiple factors stacking up to pressure global assets. Tensions in the Middle East and Eastern Europe, such as Ukraine attacking Putin’s residence and Iran’s nuclear threat escalation, have accelerated the deterioration of investor risk sentiment. Meanwhile, uncertainties over the Federal Reserve Chair nomination and changing expectations of Trump policies have further intensified sharp fluctuations in commodities and stock markets.

Commodity Plunge, Fed Chair Uncertainty Sparks Risk Asset Sell-off

Precious metals collectively face difficulties. Gold once plummeted over $200, touching a low of $4,302, and closed the day down 4.42% at $4,332.2 per ounce; silver was targeted by short sellers, dropping over 9%; palladium tumbled 17%, and platinum fell more than 15%. Behind this sharp decline are rising concerns over the Fed Chair nomination and a market re-pricing of Trump policies.

Oil markets moved in the opposite direction. WTI crude rose 1.58% to $57.8 per barrel, supported by tensions in the Middle East. If Iran re-arms, the U.S. will surely defeat it—this tough stance was expressed by Trump during his meeting with Israeli Prime Minister Netanyahu at Mar-a-Lago, hinting at possible further U.S. action against Iran. The Israeli government has prepared intelligence files related to Iran, which Netanyahu will submit to the U.S. during his visit. As a key Middle Eastern power, Iran’s every move influences global energy markets.

Stock Markets Generally Decline, Tech and Financials Under Pressure

The three major U.S. stock indices all declined. The Dow fell 0.51%, the S&P 500 dropped 0.35%, and the Nasdaq declined 0.5%. Tech giants like NVIDIA closed down 1.2%, data analytics firm Palantir fell 2.4%, and Tesla dropped the deepest at 3.3%. Financial sectors also suffered; Goldman Sachs declined 1.6%, American Express and JPMorgan Chase both fell over 1%. Silver miners were affected by the drop in precious metals, with Coeur down 4.4% and Hecla plunging 4.9%.

European stocks showed mixed results. the UK FTSE 100 slightly declined by 0.04%, Germany’s DAX 30 rose 0.05%, and France’s CAC 40 increased 0.1%. The U.S. 10-year Treasury yield retreated to 4.11%, down 2 basis points from the previous trading day.

Geopolitical Tensions Rise, Middle East Becomes Market Variable

Conflict between Ukraine and Russia escalated again. Russian Foreign Minister Lavrov claimed that Ukraine attempted to attack Putin’s residence in Novgorod with 91 drones early Monday, all of which were destroyed. Russia has identified targets and timing for retaliation but stated it will not exit the peace negotiations, although considering Kyiv’s turn toward state terrorism, Russia’s stance may adjust. Ukrainian President Zelensky denied this, accusing Russia of fabricating lies to justify ongoing attacks.

Adding to market concerns is the situation in the Middle East. Trump threatened that if Iran re-arms, the U.S. will defeat it; if Iran develops nuclear weapons, the U.S. supports quick strikes. Netanyahu’s visit to the U.S. comes at a critical moment for the Gaza ceasefire agreement, with Israel potentially striking Iranian military facilities again. As a regional hub, Iran’s strategic moves directly impact regional stability and global energy supplies.

Furthermore, Trump indicated that U.S. forces destroyed a large facility in Venezuela last week, suspected to be a drug-related operation center, hinting at possible land-based strikes. These escalating geopolitical conflicts have heightened investor concerns over energy and regional risks.

Fed Chair Nominee Pending, Policy Uncertainty Looms Over Markets

Trump has yet to officially announce his choice for the new Fed Chair, expected to be revealed in January next year. Meanwhile, Trump is considering prosecuting current Chair Powell for incompetence, criticizing his handling of interest rate policies and the Fed building renovation as “terrible,” and suggesting Powell should resign. This uncertainty has increased market worries about future monetary policy directions, leading to a sell-off in precious metals.

The Fed’s December policy meeting minutes are still to be released today, with markets closely watching for changes in wording. At the same time, the Bank of Japan’s December meeting summary shows many members believe further rate hikes are necessary. During the December 18-19 meeting, the BOJ raised its policy rate from 0.5% to a 30-year high of 0.75%.

Cryptocurrencies Under Pressure, Bitcoin and Ethereum Diverge

Digital assets face adjustment pressures. Bitcoin fell 0.89% in 24 hours to $92,550, while Ethereum rose 2.00% to $3,240 in the same period. Cryptocurrencies and risk assets fluctuate in tandem, reflecting real-time changes in market risk sentiment.

Major Mergers Boost Tech Stocks, Industry Consolidation Accelerates

SoftBank acquired digital infrastructure investment firm DigitalBridge for $4 billion, offering $16 per share, a 15% premium over Friday’s closing price. DigitalBridge manages approximately $108 billion in assets across data centers, cell towers, fiber networks, and other critical infrastructure. This move underscores tech giants’ strategic focus on AI infrastructure.

NVIDIA invested $5 billion to acquire a stake in Intel, purchasing over 214.7 million shares through private placements, fulfilling a plan announced in September. U.S. antitrust authorities have approved the deal. This is seen as a significant financial boost for Intel after years of difficulties and also reflects NVIDIA’s strategic layout in the upstream chip industry chain.

Trade Outlook Eases, Global Economy Looks to Turn

Bank of America CEO Moynihan stated that after the 2025 tariff impacts, the Trump administration is expected to de-escalate trade tensions by 2026. BofA forecasts an average tariff of 15%, with higher tariffs on countries that do not commit to buying American goods. Moynihan said tariffs will increase from a general 10% to 15%, but this will not cause major disruptions, signaling a beginning of trade war easing. However, China and North American trade partners remain exceptions, with the USMCA agreement evaluation planned for next year. Overall, global trade conflicts are nearing an end.

Market Data Overview

Exchange Rate Performance: US Dollar Index down 0.04% to 98.0; USD/JPY down 0.34%; EUR/USD up 0.01%

Hong Kong Stock Futures: Hang Seng Index night futures at 25,603 points, 32 points below yesterday’s close; China Enterprises Index night futures at 8,879 points

Today’s Focus: Release of Fed monetary policy meeting minutes, US December Chicago PMI, US October FHFA House Price Index, and other data to be announced sequentially