Do they go to destroy Iran’s emerging nuclear weapons sites?

Do they go to destroy Iran’s IRGC and their weapons depots and military installations?

Do they go to destroy Iran’s industrial base (power plants, crude oil refineries, pipelines and energy export terminals?

Iran is the sponsor of Hamas, Hezbollah and the Houthis and with those degraded Iran is getting boxed in. President Trump has no problem with punishing Iran and knocking out major facilities could incite revolt in the country. A war between Israel and Iran could get ugly if Iran uses its few nuc’s or biological weapons. In the end Israel, the US and many of the US’s Middle East allies would love to see Iran’s mullahs neutered. We are in a dangerous period. 

On the Ukraine front the new Secretary of Defense has said that US troops would not guarantee Ukraine’s security after the war is over and that Ukraine would not be allowed to join NATO. The Pentagon head said that a ‘return to Ukraine’s Pre-War Borders is Unrealistic”. He urged Europe to raise its military spending to 5% of GDP from 2% and be responsible for Ukraine’s security. In the meantime, Russia continues to gain ground in eastern Ukraine and is getting more munitions, artillery and fighting manpower from North Korea as it moves to defeat Ukraine soldiers in Russian territory in the Kursk region. President Trump and President Putin had a productive phone call today that opened talks to end the Ukraine war and discussed the release of US hostages in Russia and Russians held by the US.

On the Tariff front, Trump has put on significant steel tariffs worldwide and Canada and Mexico will be hurt by this. Many of the mills in the two countries take China steel and create products that are shipped to the US. This won’t hurt China’s dumping but will be a problem for mills on both sides of the US border.

I don ‘t believe that the Trump administration will accept that Canada has done enough to extend the 30 day tariff delay. The Liberal government has made some modest moves but if they win the upcoming election then a 180° will be their move. All that they are doing to pacify Trump is anathema to their beliefs. Getting elected again  as the government in power is all that matters, not the policy reversals to gain control again. The C$ is today at US$0.70 but could easily fall to US$0.68 in the coming weeks.

The US economy remains resilient but with inflation pressures. Non-farm Payrolls rose 143K (forecast was for up 169K) and sharply down from December’s 307K new jobs. Average hourly earnings rose 4.1% in January year over year. In the month of January alone they rose 0.5% making the Fed’s job even tougher. Today the US CPI came in at 0.5% for December lifting the 2024 rate to 3.0% (above the Fed’s 2% target). Food (eggs now over US$7.30/doz.) and energy drove the price levels higher. The US bond market vigilantes hit bonds and yields rose. The 10-Year yield is now 4.65%. Consumers now see 2025 inflation coming in at 4.3%.

Regarding energy,

Our WTI BUY price target of US$66-69/b was reached in September and is likely to test that level again in the coming weeks. Today WTI is at US$71.48/b (down a few cents from last week). We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (US$66-68/b). A breach of US$70/b should start the next material downwave for crude prices. When this occurs we should see another BUY signal triggered. We plan to add additional BUY ideas at that time. Subscribers please watch your emails on weak market days as this is when such an Action Alert would be issued.