President Trump directly tied the $20 billion lifeline the U.S. is extending to Argentina to President Javier Milei’s success in the upcoming midterm elections.
“If he loses, we are not going to be generous with Argentina,” Trump said, sitting across a table at the White House from the visiting South American leader, who he also endorsed for re-election in 2027. “If he doesn’t win, we’re gone.”
Oil futures popped higher Sunday evening, after a drone attack that killed three U.S. service members in northern Jordan, blamed by the White House on Iran-backed militants, marked a major escalation of tensions in the Middle East.
West Texas Intermediate crude for March delivery CL00, +1.22%
CLH24, +1.22%
was up $1.09, or 1.4%, at $79.10 a barrel on the New York Mercantile Exchange. March Brent crude BRN00, +1.15%
BRNH24, +1.14%,
the global benchmark, gained $1.11, or 1.3%, to trade at $84.66 a barrel on ICE Futures Europe.
Much will ultimately depend on the U.S. response and whether Iran takes action aimed at shutting down the Strait of Hormuz, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch on Sunday afternoon.
“We are on the cusp of this escalating, which could seriously impact the flow of crude oil,” he said.
Three U.S. service members were killed and more than two dozen injured in a drone strike on a U.S. base in northeast Jordan, according to U.S. Central Command. They were the first U.S. fatalities in months of attacks on U.S. bases by Iran-backed militias since the start of the Israel-Hamas war in October.
President Joe Biden attributed the Sunday attack to an Iran-backed militia group and said the U.S. “will hold all those responsible to account at a time and in a manner (of) our choosing.” News reports said U.S. officials were still working to conclusively identify the precise group responsible for the attack, but have assessed that one of several Iranian-backed groups is to blame.
Some congressional Republicans called for direct retaliation on Iran.
“We must respond to these repeated attacks by Iran & its proxies by striking directly against Iranian targets & its leadership. The Biden administration’s responses thus far have only invited more attacks. It is time to act swiftly and decisively for the whole world to see,” wrote Sen. Roger Wicker of Mississippi, the senior Republican on the Senate Armed Services Committee, in a post on X.
Oil futures rallied last week to their highest since November, but with gains attributed in part to production outages in the U.S. and more upbeat expectations around economic growth.
“Crude already has the wind to its back, so this will only offer further upside,” Chris Weston, head of research at Australian brokerage Pepperstone told MarketWatch in an email.
With the U.S. election later this year, “Biden needs to strike a balance between increasing aggression that potentially puts U.S. serviceman lives in danger and could potentially raise the cost of living…while also showing a defiant stance that shows his resolve against terror,” Weston said.
Oil prices have seen short-lived rallies around developments in the Middle East since the start of the Israel-Hamas war, but have failed to build in a lasting geopolitical risk premium. West Texas Intermediate crude CL00, +1.22%
CL.1, +1.22%,
the U.S. benchmark, remains around $15 below its 2023 peak in the mid-$90s set in late September. Brent crude BRN00, +1.15%,
the global benchmark, pushed back above $80 a barrel last week.
Attacks by Iran-backed Houthi militants on Red Sea shipping have forced a rerouting of tankers and cargo ships. For crude, that’s had implications for the physical market but hasn’t interrupted the flow of crude from the Middle East.
A move by Iran aimed at closing off the Strait of Hormuz, the world’s biggest oil-transportation chokepoint, remains a top worry.
The strait is a narrow waterway that links the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, the waterway is only 21 miles wide, and the width of the shipping lane in either direction is just two miles, separated by a two-mile buffer zone.
Energy Information Administration
Around 21 million barrels a day of crude moved through the waterway in the first half of 2023, equivalent to around a fifth of daily global consumption, according to the U.S. Energy Information Administration.
The U.S. stock market has largely looked past Middle East tensions, with the S&P 500 SPX
returning to record territory this month, while the Dow Jones Industrial Average DJIA
has also set a series of records.
Dow futures YM00, -0.20%
were off 94 points, or 0.3% as Asian trading got under way, while S&P 500 futures ES00, -0.22%
fell 12 points, or 0.2%, and Nasdaq-100 futures NQ00, -0.24%
lost 0.3%.
Away from oil, there were no signs of a significant surge in demand for instruments that traditionally serve as havens during periods of increased geopolitical tension. Futures on U.S. Treasurys TY00, +0.21%
saw a modest rise of 0.2%, while the U.S. dollar DXY
was little changed versus major rivals and gold futures GC00, +0.41%
ticked up 0.4%.
Escalating Middle East tensions won’t go unnoticed by traders, but probably doesn’t warrant a “solid derisking,” Weston said, particularly with investors facing a barrage of major market events in the week ahead.
For U.S.-focused investors, the week ahead features a Federal Reserve policy meeting, earnings from tech industry heavyweights and a crucial December jobs report.
The Middle East situation “won’t take us too far off the rates, growth track, but we have an eye on whether this escalates,” Weston said.
Editor’s Note: A version of this story appeared in CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.
New York CNN
—
If you live in America, you’re not allowed to trade crypto derivatives. And if you’re a big international platform for trading crypto derivatives, you can’t let Americans trade those products if you haven’t registered with the boring-sounding but not-to-be-trifled-with federal regulator known as the Commodity Futures Trading Commission, or CFTC.
Today, that regulator sued Binance, the world’s largest cryptocurrency exchange, for allegedly doing just that. (And if that name sounds familiar, it may because back in November, Binance briefly flirted with bailing out its smaller rival, FTX. Obviously, Binance took one look under the hood at FTX, now at the center of a massive federal fraud investigation, and promptly bailed.)
Here’s the deal: The CFTC alleges that Binance and its CEO violated US trading laws by, among other things, secretly coaching “VIP” customers within the United States on how to evade compliance controls.
The commission, which regulates US derivatives trading, said the company and its CEO, Changpeng Zhao, “instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits.”
Which, you know, isn’t something you want to be caught doing. The CFTC can’t bring criminal charges, but it can seek heavy fines and potentially ban Binance from registering in the US in the future.
Binance said the lawsuit was “unexpected and disappointing,” adding that it has made “significant investments” in the past two years to ensure that US-based investors are not active on the platform.
As news of the lawsuit broke Monday, Zhao, known as “CZ,” tweeted the number 4, pointing to a part of a previous statement: “Ignore FUD, fake news, attacks, etc.” (FUD is a commonly used acronym among crypto folks that stands for “fear, uncertainty, doubt.”)
Binance has long argued that it isn’t subject to US laws because it doesn’t have a physical headquarters in America. Or anywhere, really — CZ claims that the company’s headquarters are wherever he is at any point in time, “reflecting a deliberate approach to attempt to avoid regulation,” according to the CFTC’s lawsuit.
The CFTC’s lawsuit is certainly not great news for Binance, or for crypto more broadly. But it’s not quite the seismic event that was FTX’s collapse, or even the Terra/Luna meltdown. (You can read more about those here and here but, tl;dr: Those 2022 events were, to use a technical term, holy-crap-sell-everything-call-your-dad-and-cry moments for crypto investors.)
Prices of bitcoin and ethereum, the two most popular cryptocurrencies, fell more than 3% Monday. Which is to say, it was just another day trading virtual currencies.
Perhaps the most significant part of the lawsuit is the way the CFTC loudly calls out one of the worst-kept secrets in all of crypto: That not only are US customers gaining access to risky offshore crypto derivatives they shouldn’t be allowed to access, but it’s also pretty darn easy to do so. All anyone needs is a VPN and an iron stomach, because crypto derivatives are leveraged bets on wildly unstable assets. (And like everything in this newsletter, that shouldn’t be taken as any kind of advice.)
The likely outcome, said Timothy Cradle, a crypto compliance and regulation expert at Blockchain Intelligence Group, will be that Binance ends up paying “hundreds of millions of dollars” in fines and will be prevented from registering a derivatives exchange in the future. That’s “a terminal blow for users of their service located in the US and a significant hit to Binance’s revenue” as the suit alleges US users make up 16% of the revenue for Binance’s derivatives product.
Monday’s news adds yet another layer of regulatory scrutiny on crypto’s biggest players. The Internal Revenue Service and Securities and Exchange Commission are also reportedly also investigating Binance, per Bloomberg.
Meanwhile, Coinbase, the largest US-listed crypto exchange, received a so-called Wells notice (typically a precursor to enforcement action) last week from the SEC for possible securities law violations.
And just to pile on: The crypto industry earlier this month lost two of its biggest connections to the mainstream finance world — Silvergate and Signature Bank.
All in all, not a great month for the industry that is perpetually straining credibility even when it’s hot. And right now, it is decidedly not.
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