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What you need to know

America steps up pressure on Iran as “armada” arrives

Tensions between America and Iran continued to build after President Donald Trump said a “massive armada” was heading toward Iran and warned Tehran to accept what he called a “fair and equitable” deal or face an even harsher U.S. attack than the strikes carried out in June.

U.S. assets, naval, air, and air defense, continue to be deployed to the region. It’s still not clear whether the USS George H.W. Bush carrier strike group, currently somewhere in the Atlantic, will also join the U.S.S. Abraham Lincoln strike group which is currently off the coast of Oman.

Iran’s foreign minister, Abbas Araqchi, says talks cannot proceed under threats and what he called “excessive demands.”

In Europe, pressure on Iran is also rising. European Union foreign-policy chief Kaja Kallas said the EU expects to designate the Islamic Revolutionary Guard Corps as a terrorist organization and to adopt additional sanctions linked to Iran’s crackdown on protests, after France shifted to support the move.

Three key U.S. demands being put to Iran in any deal are: an end to Iran enriching uranium on its own; limits on long-range ballistic missiles; and limits on Iran’s network of armed proxies in the Middle East.

It is highly unlikely that Iran’s regime will agree to any of these demands, and certainly not to all of them. With the military build up and the assertive rhetoric out of Washington, the chances of military action are increasing. 

Iran’s Foreign Minister, Abbas Araghchi, will travel to Ankara tomorrow to meet with Turkish Foreign Minister Hakan Fidan, in what should be seen as an attempt to open up and intermediary channel with the U.S.

Yesterday Iran’s Supreme Leader, Ayatollah Ali Khamenei, visited shrines in the holy city of Qom, which he tends to do in conjunction with major decisions and is being interpreted by many in the region as a sign that war is close.

America first

The Fed signals the hiking cycle is over

The Federal Reserve has paused rate cuts, holding its policy rate at 3.5% to 3.75% after a 10–2 vote, and Federal Reserve Chair Jerome H. Powell made clear that a hike is not the base case, a sign that the tightening cycle is effectively finished.

The debate has shifted to how long the Fed should hold before easing. Powell said inflation remains elevated, but argued that much of the extra pressure reflects tariff-related price increases rather than underlying demand, with core PCE excluding tariff effects running only slightly above 2%.

He expects tariff-driven inflation to peak by mid-2026 and then fade, which would give the Fed more room to loosen policy.

He also said growth has again surprised on the upside, unemployment shows signs of stabilizing, and current policy is already restrictive enough. The Fed will decide meeting by meeting and has not pre-committed to future cuts, but it no longer treats rate hikes as a realistic option at this point.

Powell repeated that the Fed does not target the dollar and sees limited evidence of large-scale hedging out of dollar assets.

Powell described the U.S. budget deficit as unsustainable and argued it should be addressed sooner rather than later, remarks that market commentary linked to renewed strength in gold and silver prices, even as Powell cautioned against reading too much into the tremendous rise in the price of gold and other commodities.

DHS funding fight as Dems push ICE “guardrails” & talk Noem impeachment

Congress is heading toward a partial shutdown deadline at the end of the week, with the Department of Homeland Security (DHS) the main flashpoint. Senate Democrats are threatening to withhold votes for full-year DHS funding unless the bill includes new restrictions on immigration enforcement, including a ban on face masks, mandatory body cameras, visible identification, tighter warrant requirements, and police-style use-of-force standards.

The standoff has sharpened after two fatal shootings in Minneapolis linked to federal immigration operations, which Democrats cite as evidence that enforcement tactics need tighter oversight. House Republicans have already passed a stand-alone DHS appropriations bill for FY2026, but Senate Democrats are seeking either major changes or a procedural workaround that separates DHS funding from the rest of the government’s funding package.

Negotiators are now floating a short-term stopgap for DHS while moving other spending measures, as President Donald Trump and Senate Minority Leader Chuck Schumer explore a deal framework aimed at averting a shutdown. But even if DHS appropriations stall, ICE enforcement may not halt. DHS and ICE have access to substantial funds outside the annual appropriations process (from a prior reconciliation/tax law), which could keep operations going even amid a funding fight, though it may not fully substitute for regular appropriations.

In parallel, impeachment rhetoric has escalated. A House resolution to impeach Secretary Kristi Noem has been referred to the House Judiciary Committee. It has amassed a large bloc of Democratic cosponsors, but remains at an early stage. To remove a Cabinet secretary via impeachment, the House would need to adopt articles by a simple majority and the Senate would need a two-thirds vote to convict. Nothing suggests it is anywhere near that stage.

We should be watching whether the Senate opts for a short-term DHS extension to buy time for negotiations, whether any bipartisan compromise emerges quickly enough to unlock votes, and whether House Judiciary takes up the impeachment resolution or leaves it dormant as leverage during the funding fight.

It’s now the U.S. vs China, everyone needs to pick a side

Starmer courts Beijing, and asks it to choke off “small boat” engines

Britain’s prime minister, Sir Keir Starmer, has used his current trip to Beijing to push two tracks at once: a quiet economic reset, and practical cooperation on border security.

The clearest political outcome so far is a rather modest UK–China border-security agreement focused on disrupting the supply chains for inflatable boats, engines, and related parts used by people-smuggling networks operating across Europe. Downing Street says the arrangement will enable intelligence-sharing on supply routes and direct engagement with Chinese manufacturers so legitimate firms are not exploited by organized crime. It also says the two sides agreed to scale up removals of people with no right to be in the UK, and to deepen cooperation against synthetic opioids, including nitazenes and precursor chemicals.

Beyond migration, Starmer has framed the visit as a bid for economic wins. He has said he made “good progress” in talks on reducing tariffs on whisky, and that China would consider waiving visas for British nationals. He also said he raised human-rights issues, including the case of Jimmy Lai, a British citizen jailed under Hong Kong’s national-security regime.

China has also agreed to provide UK passport holders with visa-free entry for visits of less than 30 days.

A notable commercial announcement landed during the trip: AstraZeneca said it would invest $15bn in China through 2030 to expand manufacturing and research and development, which has been described as the biggest deal so far associated with Starmer’s visit.

Instability from Sahel to Horn of Africa amid state fragility, Russian interference, & Islamist insurgencies

Ethiopia’s federal forces pull back in southern Tigray as flights are suspended

Tigrayan troops took control of a string of checkpoints in southern Tigray overnight, according to local reporting and social-media accounts, after ordering soldiers from the Ethiopian National Defence Force (ENDF) to leave positions in and around Alamata, Korem, and Waja.

Ethiopian Airlines also suspended flights scheduled for today to several airports in Tigray, including Mekelle, Axum, Shire, and Humera. The airline did not publicly provide a detailed explanation, but we assume it’s related.

The two developments point to rising tension between Tigray and the Ethiopian federal government, and raise the risk of further disruptions to movement, commerce, and humanitarian access in the north.

Tigray and Ethiopian federal forces fought a vicious civil war between November 2020 and November 2022. There’s been an uneasy peace since.

Niger’s airport hit by overnight terrorist attack

Explosions and sustained gunfire were reported around Diori Hamani International Airport in Niamey shortly after midnight on 29 January. Witness accounts described a prolonged exchange, with heavy firing and blasts audible across parts of the capital before the situation appeared to calm.

Early indications point to an organized assault rather than a brief clash. Reports circulating locally suggest a combination of fighters on the ground and aerial systems, including drones, although neither the methods nor the perpetrators have been confirmed by Nigerien authorities in public statements. At least one attacker was captured by security forces.

Suspicion has fallen on Jama’at Nusrat al-Islam wal-Muslimin (JNIM), al-Qaeda’s local affiliate, which has greatly expanded its operational reach in the Sahel in recent years and has shown interest in high-profile targets linked to state security.

The incident has drawn greater attention because the airport complex is tied to military infrastructure and is widely reported to be a storage and staging point for uranium concentrate (“yellowcake”) arriving from the Arlit mining area. If the attack proves connected to that cargo, the strategic logic would be straightforward: disrupting sensitive supply chains, forcing the junta to divert forces, and generating international alarm. Even without a direct link, an attack at the airport underscores the fragility of security in the capital and the risks around any high-value material kept at a major transport hub.

Indonesia’s markets rattle as investability concerns flare

Indonesia’s financial markets were jolted this week after Morgan Stanley Capital International raised concerns about “investability” and transparency in the country’s equity market, warning that a downgrade from emerging- to frontier-market status is possible if issues are not addressed.

Indonesian shares fell sharply, prompting temporary trading halts, while the rupiah stayed under pressure near record lows.

Regulators moved quickly to reassure investors. The financial-services authority said it would raise the minimum free-float requirement for listed companies to 15% and tighten oversight, presenting the steps as part of a broader effort to improve market depth and governance. Bank Indonesia has kept policy tight, holding its benchmark rate at 4.75% on 21 January, as it prioritizes currency stability.

The sell-off contrasts with a macro backdrop that remains broadly stable: inflation is within the official target band and the trade balance continues to post a surplus. Investors, however, are watching whether market reforms arrive fast enough, and whether President Prabowo Subianto’s more expansionary 2026 budget plans can be financed without unsettling confidence.

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