Geopolitical Tensions Keep Oil Prices Elevated
Oil prices held onto overnight gains amid heightened geopolitical tensions. Russia accused Ukraine of attacking President Vladimir Putin’s residence—a claim for which Moscow provided no evidence—creating a setback for U.S. diplomatic efforts to broker peace. Meanwhile, former President Donald Trump suggested he might back another major strike on Iran, and China conducted ten hours of live-firing exercises near Taiwan.
Volatility in Precious Metals
Liquidity remained thin across most markets during the holiday-shortened week, exacerbating swings in silver and other metals. After reaching a record high of roughly $84 per ounce, silver plunged 8.7% in its largest one-day fall since August 2020, dragging gold and copper lower. On Tuesday, silver rebounded 2.5% to $74.1 per ounce and was still poised for an extraordinary annual gain of 156%. Gold rose 0.7% to $4,361 per ounce after a 4.4% drop overnight.
Tony Sycamore, analyst at IG in Sydney, noted that the initial spike in silver likely reflected stop-loss triggers, panic buying, and margin hikes by the Chicago Mercantile Exchange. However, the rally quickly lost momentum, with no sustained buying at elevated levels. “We've seen a cooling in precious metals, but this trend isn’t necessarily over. Deficits remain, nations are stockpiling, and export restrictions persist,” Sycamore said.
Stock Markets Close the Year Strong
MSCI’s broadest Asia-Pacific index outside Japan inched up 0.1%, poised for a 26.7% annual gain—its best performance since 2017. Japan’s Nikkei fell 0.1% but is up 26% for the year. China’s blue-chip CSI 300 index rose 0.2%, and Hong Kong’s Hang Seng gained 0.4%. U.S. and European stock futures were mostly steady in Asia.
Overnight, Wall Street ended lower as major tech stocks retreated from last week’s gains. Despite this, U.S. equities are on track to close 2025 near record highs, marking a tumultuous year of tariff wars, central bank policy shifts, and geopolitical tensions.
Currency Markets: Dollar Faces Steep Annual Decline
The U.S. dollar remained steady ahead of the release of the Federal Reserve’s December meeting minutes, which are expected to show a divided central bank uncertain about next year’s policy direction. The dollar index is set for a nearly 10% annual drop—the steepest in eight years. The yen hovered at 156.06 per dollar, safely below the 158–160 range that could trigger intervention, while the euro traded at $1.1777, tracking a 13.7% annual gain.
Rate cuts in the U.S. and the prospect of more next year have pressured the dollar and boosted Treasuries, particularly at the short end. Two-year yields slipped 1 basis point to 3.4586%, marking a fourth consecutive session of declines and an almost 80 basis-point drop for the year. The 10-year yield is set for a 46-basis-point annual decline.
Oil Market Update
Oil prices largely held steady after Monday’s gains. Brent crude futures were flat at $61.92 per barrel, following a 2.1% jump, while U.S. West Texas Intermediate crude fell slightly to $58.01 per barrel.