Market News

• Prior +0.1%; revised to +1.2%

The drop here needs to be put into context a little more, as it comes after a major bump up in the December 2025 retail sales jump. That figure was seen revised from +0.1% to +1.2% on the month. So, the miss on estimates in the headline isn't as bad as what it might imply at first glance.

Looking at the details, the decline in January 2026 stems mostly from a fall in the non-food retail sector. Sales there fell by 1.7% on the month while food store sales were unchanged in real terms for the first month of the year.

There's plenty to digest as we get the new week/month underway in trading today. The main story is that the US, alongside Israel, finally decided to launch military attacks against Iran. Reports are saying that the strikes were supposed to be carried out last week but were delayed due to operational and intelligence reasons.

Nonetheless, the escalation in military conflict is the key thing driving markets with Iran also fighting back. What is notable is that Iran is not only hitting back at US-based targets but is stirring up conflict in other places in the Middle East too.

Oil prices have surged higher on the weekend developments, with WTI crude opening with a gap up to above $75 before settling back down now to be around $71 as the…

• BOJ's Himino: GDP is tracking okay
• Trump floats lifting sanctions against a new Iranian regime
• Bolton warns Trump may not have thought past the trigger on Iran
• OPEC+ hiked oil production by 206,000 bpd in Sunday's meeting
• Trump: We have hit hundreds of targets

Markets:

• WTI crude oil up $3.74 to $5.6%
• US 10-year yields up 1.7 bps to 3.98%
• Gold up $80 to $5355
• S&P 500 futures down 0.7%
• USD leads, GBP lags

The whole market was holding its breath as oil futures opened to start the week and the initial price action was explosive with WTI hitting $75.33 and brent rising to $82.37. Those levels didn't last though as both stayed at the peaks for mere seconds and are now trading $5 from the peaks. Both are still around 5.5% higher though in a significant…

When the market hears bombs, it buys bonds.

Or at least that's usually the case. This time, the market is weighing whether the war in Iran is inflationary due to the 4.5% rise in oil prices so far. Notably, the gains in the oil market have been halved since the open but yields are at the highs of the day.

US 10-year yields are up 1.3 bps to 3.975% after falling below the big figure late last week. You could argue there is some profit taking ongoing on a "sell the fact" trade but it's still surprising to see yields higher.

Looking at the chart, yields are trying to bounce off the autumn lows.

The worry I have is that Iran is better-equipped to fight back than expected. There is also the semblance of a surprise strategy unfolding:

• They are…

I just finished writing up an interview with former Trump National Security Advisor John Bolton and he talked about how Trump "doesn't do strategic thinking" and his latest comments to the New York Times underscore that.

"The president offered a variety of often inconsistent visions of how a new government could take shape after the targeted killing of Ayatollah Ali Khamenei," the report says.

In one, he said the Islamic Revolutionary Guard Corps could turn over their weapons to the people. I another, he suggested a leadership change.

The report challenges that:

he has been told by his advisers that the vast differences in cultures and history made it…

John Bolton gave a candid interview to Politico and it's worth reading carefully if you're trying to figure out what comes next for oil markets and geopolitical risk.

The former National Security Adviser praised the strikes as the "most consequential decision" of Trump's presidency, but his warnings were pointed. Bolton said he's "very worried" that the administration didn't do adequate consultation with the Iranian opposition before pulling the trigger.

Bolton walked through the mine scenario carefully and highlighted that Iran can't mine the strait if they don't have a navy, something the US appears to have already taken care of. He also acknowledged what markets are already pricing in — a temporary pause in oil flows is coming…

By now, everyone knows what's happening as the US and Israel strike Iran. Here is the state of play one hour into futures trading:

• WTI crude up $5.37 to $72.40 (about 8%)
• Gold up 2% to $5385
• The US dollar leads in FX, narrowly ahead of CHF
• AUD/USD is the biggest mover, down 60 pips (or 0.82%) to 0.7054
• Nikkei 225 opens down 1.5%
• Bitcoin flat near $66K

The latest war headline: Israeli military says it continues to carry out large-scale strikes against targets across Tehran.

I'm somewhat surprised that USD/JPY is up 65 pips to 156.68. It's creeping up on last week's high.

I think many things are trading off oil and trying to figure out if that reverberates back into inflation or fades. There is certainly going to be something of a shock at the…

Comments from Trump in a newly-released video:

• On Iran: We have hit hundreds of targets including Revolutionary Guard facilities, air defense systems and nine ships plus naval building

• On Iran: Combat operations continue

• On Iran: Military operations will continue until all of our objectives are achieved

• There will likely be more U.S. casualties

• Iranian regime armed with long range missiles and nuclear weapons would be a dire threat to every American

• U.S. will avenge the deaths of Americans

• US lawmakers see no plan for Iran following strikes

• Urge Revolutionary Guard, Iranian military and police to lay down arms and receive immunity or face certain death

• Call on Iranians to seize this moment take back your country

• To Iranians: America is with you

An…