Markets mixed as geopolitical risks shape global outlook

Global markets opened the week on a cautious note as investors weighed a complex mix of geopolitical developments, shifting trade dynamics and evolving macroeconomic signals. WTI crude oil futures steadied around $59.40 per barrel on Monday, pausing after an initial slide and capping off four straight weeks of advances. This consolidation in oil prices followed a modest easing of tensions with Iran, as US President Donald Trump signalled a potential delay in military response after Tehran committed to sparing protesters, though he cautioned that tougher steps could return if conditions worsen, reducing supply disruption concerns. Meanwhile, other commodities led with gold rising 1.76%, silver surging by 5.10% and platinum advancing 2.53%.

European equity markets retreated sharply, reversing part of last week’s record-setting rally. The Eurozone’s STOXX 50 fell 1.70% to 5 922, while the broader STOXX 600 declined 1.20% to 607. London’s FTSE 100 edged down by 0.40%. The pullback followed renewed trade tensions after President Trump threatened to impose tariffs of 10% on key European economies including Germany, the UK, France, Sweden, Norway, the Netherlands, Finland, and Denmark, should they persist in opposing the proposed sale of Greenland to the US. He further warned that tariffs could rise to 25% by June, reigniting concerns about global trade fragmentation and its potential impact on growth. Luxury brands and carmakers took the biggest hits, given their heavy US exposure: LVMH, Adidas and Hermès dropped between 5% and 3.50%, with BMW and Volkswagen down 4% and 3%, respectively.

Inflation data in the euro area offered some relief as consumer price inflation (CPI) eased to 1.90% in December 2025, down from 2.10% in November, marking the first time since May that inflation has fallen just below the European Central Bank’s 2% target and reinforcing expectations that interest rates are likely to remain unchanged for an extended period.

In South Africa, the rand weakened to around R16.50 against the US dollar, its lowest in over a week, as global risk appetite took its toll. Attention also turned to upcoming inflation figures, where economists forecast a slight uptick to 3.60% for December from 3.50% the prior month.

This caution fits into a broader macroeconomic picture, with the International Monetary Fund lifting its global growth forecast to 3.30% from 3.10%. The upgrade reflects sturdy economic resilience, robust labour markets and surging artificial intelligence (AI)-driven investment. Yet the IMF, warn that underwhelming productivity from these trends could spark market pullbacks and dent household wealth.

In Asia, the Hang Seng Index fell 1% to 26 564, extending losses for a third consecutive session. Sentiment weakened further after US futures declined and concerns mounted over escalating trade tensions. Meanwhile, China reported that fourth-quarter GDP growth slowed to a three-year low, highlighting ongoing challenges from weak domestic demand.