The situation in Iran is delicate, Powell was sued, gold and silver hit new highs, oil prices continued to rise, and U.S. stock futures fell

# Source: Wall Street Insights

By Long Yue

Gold hit a new record high, silver surged 5%, and Brent crude rose over 1% to approach $64 per barrel. Meanwhile, the market is heavily betting on rising oil prices through the options market. According to CCTV News and Xinhua News Agency, Trump will discuss various intervention plans on the 13th, including military strikes, dispatch of aircraft carriers, and cyberattacks. Iran confirmed that hundreds of people have been killed in the recent unrest. At the same time, the U.S. Department of Justice has launched a criminal investigation into Powell, who responded that this is "the consequence of the Federal Reserve not following orders".

Global financial markets are being simultaneously impacted by the latest developments in Iran and the judicial controversy surrounding the Federal Reserve.

Safe-haven sentiment intensified significantly on Monday, January 12. Spot gold climbed 1.8% to trade at $4,592 per ounce, extending its all-time high. COMEX gold futures broke through the $4,600 per ounce mark for the first time, rising 2.2% intraday. Spot palladium jumped more than 3% to $1,873.50 per ounce.

Silver's gain expanded to 5%, continuing to set new highs.

The crude oil market also reacted sharply, with both Brent crude and WTI crude rising over 1%. Data shows that after jumping nearly 6% on Thursday and Friday last week, Brent crude is now approaching the $64 per barrel mark, posting its largest two-day gain since October; WTI crude prices hovered around $60 per barrel.

However, risk assets were sold off, with U.S. stock futures falling in pre-market trading.

The core of market anxiety lies in the sudden changes in the Iranian situation over the weekend. On January 11 local time, U.S. officials disclosed to CCTV News reporters that U.S. President Trump is considering multiple options to intervene in Iran, including announcing the dispatch of aircraft carrier strike groups to the Middle East, launching cyberattacks and information warfare. In addition, Xinhua News Agency reported that Trump will meet with senior advisors on the 13th to specifically discuss options regarding the Iran issue.

This geopolitical risk has overshadowed the market's previous concerns about global oversupply. As the fourth-largest oil producer in OPEC, Iran's crude oil exports of nearly 2 million barrels per day are at risk of disruption, which has directly changed investors' expectations. At present, the market is closely watching Washington's next decision and Tehran's response measures.

**Drivers Behind the Oil Price Rally: Short Covering and $6 Billion Inflow**

The unrest in Iran has directly stimulated capital inflows into the commodities market, pushing oil prices higher for several consecutive days. Beyond the explicit geopolitical conflicts, implicit capital flows are amplifying market volatility.

Analysts believe that the key reason why Iran risk is being so aggressively priced by the market is that oil traders have held a large number of bearish bets previously.

Wall Street Insights noted that if geopolitical tensions force these short positions to be unwound, the market will face a sharp reversal. Current capital flow data indicates that bullish momentum is accumulating rapidly. James Taylor, Head of Quantitative Services at Energy Aspects, pointed out that trend-following Commodity Trading Advisors (CTAs) have been buying crude oil since Thursday, and such algorithmic funds will continue to purchase in the coming days if prices stabilize.

Meanwhile, bullish capital flows have emerged in the options market. The trading volume of Brent crude call options exceeded 750,000 contracts this week, hitting the highest level since last October. This includes a large number of call options with a strike price of $80, indicating that market participants are conducting hedging transactions (gamma hedging) against potential price surges, which will further fuel the upward trend. Currently, the skew toward bullish calls for U.S. crude oil futures has reached the highest level since July.

In addition, the inflow of passive capital cannot be ignored. RBC (Royal Bank of Canada) estimates that more than $6 billion will flow into the market in the coming days due to annual rebalancing, mainly from commodity index funds. James Taylor emphasized that trend buying from CTAs, rebalancing capital flows from index funds, and hedging operations by options traders are forming a strong financial driving force that resonates with geopolitical risks.

**Trump is Considering Multiple Options to Intervene in Iran**

The U.S. intervention plan has entered a substantive discussion phase. According to CCTV News, on January 11 local time, U.S. officials stated that Trump is considering various options to intervene in Iran. Preliminary meetings have been held within the U.S. government recently to "discuss ways to support the protests", including potential U.S. military strikes against Iranian government targets. However, "many within the Trump administration believe that taking major military action at this stage would undermine the protests". Other options to threaten the Iranian government include announcing the deployment of an aircraft carrier strike group to the Middle East, with cyberattacks and information warfare also under consideration.

Sources said that Trump is weighing all options but has not yet made a decision. Earlier, it was reported that Trump had been briefed on plans for military strikes against Iran. He has not made a final decision but is seriously considering authorizing the U.S. military to launch military strikes. U.S. President Trump will meet with senior advisors on the 13th to discuss options on the Iran issue.

**Hundreds Killed in Recent Unrest; Iran Accuses U.S.-Israel Conspiracy and Vows Retaliation**

Amid external pressures, the domestic situation in Iran remains grim. According to Xinhua News Agency, the Iranian government announced a three-day national mourning period on the 11th for the "martyrs" killed during the unrest. Iran's Tasnim News Agency quoted official sources as reporting that 111 security personnel across the country have been killed while maintaining order during the recent unrest. The Islamic Revolutionary Guard Corps of Iran issued a statement saying that the violent incidents have caused the deaths of hundreds of Iranian citizens and security personnel.

In an exclusive interview with state television, Iranian President Masoud Pezeshkian stated that the Iranian government is determined to solve the economic difficulties faced by the people, but will never tolerate external forces creating unrest. Pezeshkian bluntly stated that the recent unrest, vandalism of public facilities and other acts in Iran are a conspiracy by the United States and Israel, and the perpetrators are "not protesters, but rioters". He called on all compatriots to unite and resolutely resist sabotage activities.

In response to potential U.S. military strikes, Iran issued a clear warning of retaliation. According to Xinhua News Agency, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said on the 11th that if the United States launches an attack on Iran, Iran will target Israel and U.S. military bases in the Middle East as "legitimate targets" in retaliation.

**Powell Under Criminal Investigation; U.S. Stock Futures Under Pressure**

In addition to external geopolitical crises, internal conflicts in U.S. politics have also unsettled the market. According to a report by The New York Times, the U.S. Department of Justice has launched a criminal investigation into Federal Reserve Chair Jerome Powell, focusing on the cost overruns of the $2.5 billion renovation project of the Federal Reserve headquarters and examining whether Powell lied to Congress about project details.

It is reported that the investigation was approved by Trump ally Jeanine Pirro, coinciding with the upcoming end of Powell's term as Fed Chair in May and Trump having finalized his successor. In response, Powell responded strongly, saying that the investigation is just a pretext and "this is the consequence of the Federal Reserve insisting on setting interest rates based on the public interest rather than following the President's preference for rate cuts". Wall Street is concerned about the pressure exerted by executive power on the independence of the central bank, which has put downward pressure on U.S. stock futures.

Wall Street Insights noted that Powell stated that he will continue to perform his duties as confirmed by the Senate.

The launch of this investigation comes just as Powell's term as Federal Reserve Chair is set to end in May this year. Trump has revealed that he has identified a successor, who is expected to be officially announced soon. Although prosecution requires evidence support from a grand jury, the investigation itself represents a new height of executive power exerting pressure on the central bank.

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