IRAN: US Military Buildup Alongside Talks Leaves Region On Edge
Geopolitical uncertainty remains the order of the day regarding the prospect of direct US-Iranian confrontation. Following on from the indirect talks between the two sides in Geneva on 17 Feb, two articles have been published today espousing differing views on the situation.
- Axios reports that "The Trump administration is closer to a major war in the Middle East than most Americans realize. It could begin very soon." The report claims that any conflict would be a broad land war, including Israeli forces. After deferring strikes during the January protests, the US pursued talks alongside a massive military buildup. The talks are said to have "made progress", but VP JD Vance claimed diplomacy has "reached its natural end." The scale of the military buildup makes it difficult for Trump to back down. "The boss is getting fed up. Some people around him warn him against going to war with Iran, but I think there is 90% chance we see kinetic action in the next few weeks," one Trump adviser said."
- Conversely, Bloomberg News writes "Unless he’s calling Tehran’s bluff, US President Donald Trump looks like he will hold off attacking Iran, at least for the next two weeks." The article outlines the risks Trump faces if he launches a full-scale war, including affecting the midterm elections, Iran widening the conflict to a regional war, and an oil price spike. BBG: "For now, Trump looks sincere in trying to give the talks a chance. But he’s wary of Iran dragging them out and he won’t give Khamenei much time to reach an agreement."
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OPTIONS: Larger FX Option Pipeline
- EUR/USD: Jan20 $1.1400(E1.6bln), $1.1715-25(E1.5bln); Jan21 $1.1690-95(E1.4bln); Jan22 $1.1550(E1.6bln), $1.1600(E2.4bln), $1.1700(E2.2bln)
- USD/JPY: Jan20 Y155.00($1.3bln); Jan21 Y158.00($1.2bln), Y158.50($1.4bln); Jan22 Y156.30($1.3bln)
OUTLOOK: Price Signal Summary - Monitoring Support In WTI
- On the commodity front, the trend structure in Gold is unchanged, it remains bullish and today’s fresh cycle high reinforces current conditions. The move higher confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Sights are on the $4696.3 next, a 0.764 projection of the Nov 18 - Dec 26 - Dec 31 swing. Initial firm support to watch lies at $4472.2, the 20-day EMA. A break of the average would signal the start of a corrective phase.
- A bull cycle in WTI futures remains intact for now and a short-term cycle high last week reinforces a bull theme. The move lower from the Jan 14 high appears corrective - for now. Price has traded through a key S/T resistance at $61.25, the Oct 25 high. This strengthens the bull phase and highlights a stronger reversal of the recent downtrend. Sights are on $62.59 next, the 76.4% retracement of the Sep 26 - Dec 16 downleg. Initial firm support lies at $58.67, the 50-day EMA.
SOFR: Net Short Setting Dominated In Futures As Hassett's Fed Chair Odds Receded
OI data points to net short setting dominating as SOFR futures ticked lower on Friday, with only one instance of net long cover seen across the front 16 contracts.
- President Trump's latest round of comments surrounding the Fed reduced odds of NEC Chair Hassett succeeding Jerome Powell, providing much of the hawkish impetus on the day.
| 16-Jan-26 | 15-Jan-26 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ5 | 1,410,859 | 1,403,812 | +7,047 | Whites | +85,750 |
SFRH6 | 1,420,399 | 1,419,758 | +641 | Reds | +67,521 |
SFRM6 | 1,287,261 | 1,239,465 | +47,796 | Greens | +25,075 |
SFRU6 | 1,304,851 | 1,274,585 | +30,266 | Blues | +13,986 |
SFRZ6 | 1,306,515 | 1,287,479 | +19,036 |
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SFRH7 | 943,266 | 908,806 | +34,460 |
|
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SFRM7 | 799,574 | 789,893 | +9,681 |
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SFRU7 | 779,765 | 775,421 | +4,344 |
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SFRZ7 | 849,459 | 847,405 | +2,054 |
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SFRH8 | 492,178 | 478,196 | +13,982 |
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SFRM8 | 421,080 | 412,955 | +8,125 |
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SFRU8 | 382,332 | 381,418 | +914 |
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SFRZ8 | 364,012 | 357,138 | +6,874 |
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SFRH9 | 206,388 | 201,855 | +4,533 |
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SFRM9 | 207,434 | 203,715 | +3,719 |
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SFRU9 | 166,874 | 168,014 | -1,140 |
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