Market Overview: Rising Geopolitical Risk Drives Volatility

As 2026 begins, global financial markets are once again being shaped by rising geopolitical risk, shifting monetary policy expectations and renewed volatility across commodities and currencies. In this week‘s Market Buzz, ETO Markets reviews the key forces driving market sentiment, including escalating tensions involving Venezuela, a weakening US dollar, and a growing conviction that oil remains materially undervalued. Against a backdrop of softening US manufacturing data, elevated equity valuations and changing global growth dynamics, ETO Markets’ Chief Investment Officer outlines the core themes and trade opportunities likely to define the year ahead.

US markets are digesting heightened uncertainty following reports that former President Donald Trump has ordered the capture of Venezuelan President Nicolás Maduro as part of an expanded anti-drug campaign. Investors are now bracing for potential geopolitical fallout, renewed sanctions risk and a rising geopolitical premium in energy markets.

At the same time, concerns are building that AI software providers may have overextended themselves through aggressive capital expenditure commitments, while US manufacturing momentum softened slightly, with December PMI confirmed at 51.8, down from 52.2 in November. There is also a growing view that the White House may ultimately take a more measured approach to trade barriers than initially feared.

Commodities in Focus: Oil, Copper and Silver Lead

Oil Prices: Geopolitical Premium Re-emerges

Oil markets remain firmly in focus as geopolitical risk returns as a dominant pricing driver. With OPEC and non-OPEC ministers set to meet and Venezuela back in headlines, oil is increasingly trading as a geopolitical hedge rather than a purely cyclical commodity.

We believe the market continues to underprice supply-side risks. Global spare capacity remains limited, OPEC+ discipline is intact, and demand remains resilient. Even modest disruptions could have an outsized impact on prices, leaving oil skewed decisively to the upside in 2026.

Copper Near Record Highs

Copper continues to trade higher, sitting just below its record high near US$5.80 per pound. Improving growth momentum in China, combined with long-term structural demand from electrification, renewable energy and infrastructure investment, continues to underpin prices.

Supply constraints, declining ore grades and limited mine expansion further reinforce a constructive outlook for copper as capital rotates toward real assets.

Silver Rebounds After Selloff

Silver rebounded 3% following its recent selloff and is now consolidating after delivering its strongest year on record. Supported by both monetary demand and accelerating industrial usage—particularly in solar and electrification—silver remains well positioned for further upside alongside gold.

US Dollar Outlook: Weak Start to the Year

The US dollar has started 2026 on a weak footing, and we expect further downside over the medium term. Expectations for lower interest rates, combined with concerns over fiscal imbalances, political uncertainty and the perceived erosion of Federal Reserve independence, are narrowing yield differentials that have historically supported the USD.

As global growth momentum improves—particularly across China and emerging Asia—capital flows are likely to rotate toward higher-beta and commodity-linked currencies, reinforcing USD weakness.

Oil Trade Focus: Fundamentals and Technicals Align

Oil Fundamentals

While short-term volatility may follow developments in Venezuela, its current production—around 900,000 barrels per day, or roughly 1% of global supply—limits its ability to materially impact global supply in the near term. Structural decline, underinvestment and infrastructure decay continue to cap output.

Broader global supply dynamics, rather than Venezuela alone, remain the dominant driver of oil prices.

Technical Outlook

Technicals remain constructive, with recent consolidation appearing corrective rather than a trend reversal. For Brent crude, US$58.50 must remain intact to sustain our bullish outlook. A break above resistance is likely to trigger momentum-driven buying.

Conclusion: Oil One of the Best-Valued Opportunities for 2026

As volatility returns and geopolitical risk reshapes market pricing, commodities, particularly oil stand out as key beneficiaries. With supply tight, demand resilient and risk premiums underpriced, ETO Markets believes oil represents one of the most attractive value opportunities heading into 2026, while a weaker US dollar and selective commodity exposure remain central to portfolio strategy.