US stocks slumped on upbeat job data, but Gold and oil surged

·         Gold recovered from hawkish Fed panic low on fading hopes of an imminent Gaza war ceasefire before 20th Jan’25 Trump 2.0 inauguration day

·         Oil surged as Biden admin may impose stricter sanctions on Russian oil (including logistics/ships carrying to Indian and Chinese refiners)

·         Wall Street slid on fading hopes of next Fed rate cut in March’25 after hotter than expected US NFP/BLS job report

Wall Street Futures stumbled late Wednesday on less dovish FOMC minutes and fading hopes of a Fed rate cut in Mar’25. Fed may cut 25 bps each twice in June and Dec’25. Previously Wall Street Futures and gold surged on softer-than-expected ADP Private jobs data. But on Friday, Wall Street Futures slumped on hotter than expected US NFP/BLS job data for Dec’24; USD surged, while GBP, EUR, US bonds and also Gold plunged.

But soon Gold recovered and surged to almost 2698 from around 2663 on fading hopes of an imminent Gaza war ceasefire, at least before 20th Jan’25, Trump 2.0 inauguration day. Biden admin officials were cautiously optimistic about the prospects of closing a hostage-ceasefire deal in Gaza before the end of US President Biden’s term, with CIA Director Burns assessing ongoing negotiations in Doha as ‘quite serious’

On early Friday, the US CIA chief Burns said:

·         Hostage talks are quite serious, giving us a chance for a deal in the next 2 weeks

·         Negotiations going on right now are quite serious and do offer the possibility, at least, of getting this done in the next couple of weeks

·         Israeli hostages held in Gaza and Palestinian civilians in the Strip were all living in hellish conditions right now

·         At this point, I still think there’s a chance [for a deal, but] I’ve learned the hard way not to get my hopes up

·         We’ll certainly — in this administration — work very hard at that right up until January 20, and I think the coordination with the new administration on this issue has been good

Meanwhile on Friday, the White House NSC spokesperson Kirby said:

·         I believe a hostage deal is possible before 20TH Jan’25

·         Do I think it’s possible? Yes, we think it’s possible, but not without a lot of hard work still ahead of us

·         We believe it is possible, but it won’t be possible without additional compromise and some hard work

·         Hamas continues to be difficult at the table

Will there be a temporary ceasefire in the Gaza War before 20th Jan’25, Trump's inauguration day?

As per the TOI report, for over a year, the White House has blamed Hamas for the lack of a ceasefire in Gaza. While Egyptian and Qatari diplomats along with some members of Israel’s negotiating team and even several US officials have told the TOI that PM Netanyahu’s refusal to agree to anything more than a temporary ceasefire has been the main obstacle; Biden admin has refrained from voicing that belief publicly.

The US Secretary of State Blinken suggested last week that US pressure on Israel has led Hamas to harden its positions. The incoming US-Mideast envoy Witkoff met Friday in Doha with Qatari PM Thani, who briefed him on the ongoing hostage negotiations that Doha is mediating between Israel and Hamas. During his meetings, Israeli Strategic Affairs Minister Dermer conveyed the message that Israel hoped to have continuity in the transition concerning US involvement in the hostage negotiations.

On Friday afternoon, an Israeli official said that PM Netanyahu held a situational assessment about the hostages with the heads of Israel’s security agencies during which the negotiating team gave updates and received instructions for the continuation of talks in Qatar: “The talks in Doha continue with intensity and with complete discretion”.

Also Friday, Israeli Defense Minister Katz announced that he had ordered the military to present him with a plan “for the complete defeat of Hamas in Gaza,” to be implemented if there were no hostage deal inked with the Palestinian terror group by the time Trump enters the White House: “If the hostage deal does not materialize by the time President Trump takes office, there must be a complete defeat of Hamas in Gaza”.

An Israeli security source noted that the defeat of Hamas is largely contingent on the establishment of a viable alternative to the terror group, which the government has refused to advance. Critics have argued that this is for political reasons because the most viable alternative is the Palestinian Authority (PA), whose advancement in Gaza Netanyahu’s far-right coalition partners have warned would lead them to collapse the government.

Overall, Hamas released 105 civilians during a weeklong truce in late November, and four hostages were released before that. Eight hostages have been rescued by IDF troops alive, and the bodies of 40 hostages have also been recovered, including three mistakenly killed by the IDF as they tried to escape their captors. Hamas is also holding two Israeli civilians who entered the Strip in 2014 and 2015, as well as the bodies of two IDF soldiers who were killed in 2014.

On early Saturday (11th Jan’25), a TOI report said: that Hamas agreed unresolved issues could be pushed off until a later phase of ceasefire. A Hamas source told a Qatari newspaper that it has agreed to put off several unresolved points of contention with Israel until a later phase of the proposed ceasefire-for-hostage deal if the next stages are implemented without delay and as required.

The report said Egyptian, Qatari, and American mediators backed Hamas’s latest message to Israel in the negotiations, and that Cairo showed flexibility about agreeing to have the withdrawal of Israeli forces from the Philadelphi Route along the Gaza-Egypt border take place at a later stage. Additionally, since talks began, they are now at the closest point [yet] to completing the agreement. Hamas and mediators are expecting a response from Israel to its proposal in the coming hours. Israel has maintained it won’t agree to any ceasefire that prevents it from resuming fighting, as the three-phase deal would ultimately require.

Meanwhile, Israel’s assault on Gaza has continued, with the north suffering repeated attacks, including a strike in Gaza City’s Remal neighborhood that killed three and injured 10. The family of an Israeli captive held in Gaza has filmed a message for US President-elect Trump accusing PM Netanyahu of sabotaging ceasefire efforts.

As Biden prepares to leave the White House, the US public has a more negative view of his presidency than they did at the end of Trump’s first term and Obama’s second term. At least half of Americans said Biden harmed the cost of living, immigration, Gaza and also Ukraine war through active support in terms of funding and military aid.

Anyway, under Senile Biden, suffering from acute Parkinson’s Disease and dementia symptoms, there was a strong global leadership vacuum in the White House and it seems that the war-savvy Deep State (US/global military lobby) has complete control of US geopolitics and policies. Now the market is expecting strong political leadership by incoming President Trump and a less war-savvy approach may help for a durable peace/ceasefire for Gaza and Ukraine war.

In summary, negotiations between Israel and Hamas are progressing toward a ceasefire to end the 15-month conflict in Gaza and facilitate the return of Israeli hostages. Both sides are under pressure from outgoing U.S. President Biden and incoming President-elect Trump to finalize an agreement before the 20th January inauguration. Trump also threatened Hamas with hell-like dire consequences if it does not sign the much-awaited Gaza war ceasefire agreement before 20th Jan’25.

The proposed Gaza war ceasefire involves a phased approach:

·         First Phase: A temporary halt in fighting, the release of Palestinian prisoners, and an increase in humanitarian aid to Gaza.

·         Final Phase: The complete release of Israeli hostages, a formal end to the war, and discussions on Gaza's future governance.

But key obstacles include uncertainties about the status of hostages and disagreements over specific prisoner releases, causing significant delays. Israel seeks guarantees regarding the hostages' conditions, while Hamas cites war conditions as a barrier to providing accurate information. Recent Israeli airstrikes in southern Gaza have resulted in civilian casualties, including women and children, intensifying the urgency for a ceasefire. Additionally, a 60-day ceasefire between Israel and Hezbollah in Lebanon has been established, potentially influencing the dynamics of the Israel-Hamas negotiations.

While optimism exists for a ceasefire in Gaza, significant challenges remain, and the situation continues to evolve. Recent developments regarding the Gaza war ceasefire indicate a cautiously optimistic atmosphere as negotiations between Hamas and Israel intensify.

Ceasefire Negotiations: Officials from both sides have reported formally that they are closer to a potential ceasefire agreement than at any previous point in the conflict. This optimism follows a positive message from Hamas, relayed by mediator Qatar, regarding their willingness to negotiate terms for a ceasefire.

Involvement of Trump Envoy: Trump's Middle East envoy Witkoff, has entered the negotiations, meeting with Qatari officials to expedite discussions. The incoming Trump administration aims to finalize an agreement before his inauguration on 20th Jan’25.

Hostage Release Discussions: Reports indicate that Hamas has agreed to release a list of 34 Israeli captives as part of the initial stage of the ceasefire agreement. This development comes amidst ongoing Israeli military operations in Gaza, which have resulted in significant casualties.

Humanitarian Crisis: The humanitarian situation in Gaza remains dire, with extensive destruction of infrastructure leading to widespread homelessness and suffering among civilians. This has reportedly shifted Hamas's focus from prisoner releases to prioritizing an end to hostilities and the reconstruction of Gaza.

Political Dynamics: Israeli PM Netanyahu faces internal political pressures that complicate negotiations. His coalition is wary of any deal that does not include a complete surrender from Hamas, which could lead to political instability for his government. The domestic political compulsion is also a key hurdle for Israel for a durable Gaza peace and a two-state permanent solution. Israel primarily kept Gaza/PA as an autonomous region without controlling internal security or any admin. This, along with active provocations by various other countries for their interest, Gaza/PA became a haven for terrorists and the overall Middle East region is a great place for business for military industrial lobby/global deep state including the US, Russia and maybe also China.

International Pressure: U.S. Secretary of State Blinken has expressed confidence that a ceasefire agreement is "very close," emphasizing the urgency for both sides to resolve escalating violence and loss of life in Gaza.

Overall, while there is a glimmer of hope for a ceasefire agreement, significant challenges remain, particularly concerning the details of hostage exchanges and the political implications for both sides (Israel and PA/Hamas). Israel has refrained from directly controlling the internal administration of Palestinian territories to avoid the demographic and political complications of annexing a large Palestinian population. However, its security policies and settlement activities in the West Bank and the blockade of Gaza keep it deeply involved in Palestinian affairs. This complex arrangement has left the Palestinian territories in a state of partial autonomy but under significant Israeli influence and control, particularly concerning security and movement.

Israel's relationship with the Gaza Strip and the Palestinian Authority (PA) has evolved significantly since the mid-20th century, particularly following the Oslo Accords in the 1990s. The Gaza Strip has been under Israeli occupation since the 1967 Six-Day War, despite various political developments and agreements aimed at establishing Palestinian governance. The area was previously administered by Egypt before being captured by Israel.

Oslo Accords (1994): The Gaza Strip was handed over to the Palestinian Authority (PA) under the Oslo Accords, granting limited self-rule. The PA assumed responsibility for governance and internal security in Gaza. In the mid-1990s, the Oslo Accords facilitated a phased transfer of authority to the PA, allowing it to govern parts of Gaza while Israel retained control over security and borders. The PA was initially led by Fatah but lost control of Hamas after the elections in 2006, leading to a split in governance. Following its takeover in 2007, Hamas has governed Gaza independently of the PA. This governance has been characterized by ongoing conflict with Israel and internal strife with Fatah, complicating the political landscape in Palestinian territories.

Despite withdrawing its military presence and dismantling settlements in 2005, Israel maintains significant control over Gaza's borders, airspace, and maritime access. The blockade imposed by Israel, which became more stringent after Hamas's rise to power, restricts the movement and goods into and out of Gaza. This has led to severe humanitarian crises, often described as creating an "open-air prison" for its residents.

Disengagement Plan (2005): Israel unilaterally withdrew settlers and military forces from Gaza but retained control over its borders, coastline, and airspace. Gaza remained under indirect Israeli control despite internal governance by Palestinians.

Hamas Takeover (2007): Hamas seized control of Gaza after violent clashes with Fatah, effectively splitting Palestinian governance. Israel imposed a blockade on Gaza, citing security concerns over Hamas's activities, including rocket attacks.

Current Status: Gaza is autonomous in terms of internal administration under Hamas but heavily constrained due to the Israeli and Egyptian blockades.  Israel does not control day-to-day internal governance but conducts military operations in response to security threats, like tunnel networks and rocket fire.

Limited Autonomy: While the PA was intended to function as a governing body in Gaza, its authority is severely limited due to both internal divisions (between Fatah and Hamas) and external pressures from Israel. The PA does not control internal security or administrative functions in Gaza; these are managed by Hamas.

West Bank and Palestinian Authority (PA): Oslo Accords Division: The West Bank was divided into three areas: Area A: Full Palestinian Authority control (administration and security); Area B: Joint control (Palestinian administration, Israeli security oversight); Area C: Full Israeli control (both administration and security), comprising 60% of the West Bank. The PA governs Areas A and B, handling civil administration and police forces. Israel maintains security and settlement expansion in Area C, often creating friction with the PA.

Israel's Perspective: Israel has refrained from directly controlling the internal administration of Palestinian territories to avoid the demographic and political complications of annexing a large Palestinian non-Jewish population. However, its security policies and settlement activities in the West Bank and the blockade of Gaza keep it deeply involved in Palestinian affairs. This complex arrangement has left the Palestinian territories in a state of partial autonomy but under significant Israeli influence and control, particularly concerning security and movement of goods and Palestinian citizens.

International Law Perspectives: International bodies continue to view Gaza as an occupied territory under Israeli control due to the ongoing blockade and military actions. This perspective is supported by various human rights organizations that argue that Israel's actions amount to collective punishment against the Palestinian population.

In summary, while there was an initial framework for Palestinian autonomy through the PA following the Oslo Accords, the reality on the ground has shifted significantly due to internal Palestinian divisions and ongoing Israeli military control, particularly following Hamas's takeover of Gaza. Historically, Israel has maintained Gaza and the Palestinian Authority (PA)-administered areas of the West Bank as separate entities with varying degrees of autonomy, while retaining overarching control over critical aspects like borders, airspace, and imports/exports.

Two-State Solution Dilemma: Annexing Gaza or integrating its population into Israel would significantly alter the demographic balance, potentially undermining the Jewish majority within Israel. Thus, Israel has avoided direct administrative control of Gaza but maintains indirect influence. Although Gaza is not rich in natural resources compared to other regions, control over its coastal waters could provide access to potential offshore gas reserves. This aspect has been less emphasized but remains a consideration in broader discussions about regional energy resources.

Israel’s control over Gaza is primarily driven by security and geopolitical concerns rather than aspirations for economic exploitation or modern urban development. Any plans for resource exploitation or large-scale economic development in Gaza would require a comprehensive peace agreement and long-term stability in the region. Israel's interest in keeping Gaza under its control is primarily driven by security concerns and strategic military objectives aimed at mitigating threats from Hamas. While demographic changes and potential economic considerations could factor into plans, the immediate focus appears to be on maintaining military oversight and preventing further attacks. The complex interplay of these factors continues to shape the ongoing conflict and negotiations surrounding Gaza.

One of Israel's long-term goals may be to alter the demographic composition of Gaza. This involves efforts to displace Palestinians from the area, which some view as a form of ethnic cleansing aimed at reducing Palestinian presence and resistance. By creating a "buffer zone" and controlling key corridors, Israel may seek to manage the population dynamics in its favor.

The Israeli military has expressed intentions to maintain a permanent presence in Gaza, indicating that any withdrawal would be contingent on significant changes in the security landscape. This suggests a desire for ongoing control rather than a complete military disengagement. Israel views control over Gaza as essential for preventing attacks from Hamas and other hostile militant groups. The ongoing conflict has led Israel to prioritize military presence in strategic areas, such as the Philadelphi corridor along the Gaza-Egypt border, to monitor and disrupt any smuggling of weapons or military supplies that could be used against it.

Natural Gas Reserves: Offshore gas fields near Gaza’s coastline, such as the Gaza Marine field, have economic potential. While Israel currently controls exploration and extraction in its waters, the development of these reserves could benefit both Palestinians and Israelis under a cooperative framework.

Security Concerns

Hamas as a Threat: Since Hamas gained control of Gaza in 2007, it has posed a significant security challenge to Israel, including rocket attacks, cross-border tunnels, and militant activities. Israel's control over Gaza's borders, airspace, and maritime access is intended to prevent arms smuggling and other security risks.

Proximity to Israeli Cities: Gaza's location makes it a direct threat to southern Israeli communities. Israel seeks to neutralize the risks posed by militant groups operating from Gaza.

Buffer Zone Strategy: Israel views Gaza as a buffer zone separating it from potentially hostile elements. Controlling the flow of goods, people, and materials into Gaza is seen as a way to limit the capability of militant groups.

Regional Stability: Israel fears that a complete disengagement from Gaza could create a power vacuum, leading to further destabilization or the rise of extremist groups allied with Iran or other hostile proxy actors.

International and Diplomatic Pressure

Avoiding Full Responsibility: Israel has avoided fully reoccupying Gaza because doing so would bring international condemnation and significant costs associated with managing a densely populated, impoverished area.

Maintaining Leverage: By controlling Gaza’s borders and resources, Israel intends to leverage over Hamas and the broader Palestinian movement; using it as a bargaining chip in peace negotiations.

Trump is actively pursuing a ceasefire to end the ongoing conflict between Israel and Hamas in Gaza. His approach emphasizes the immediate release of Israeli hostages and a swift cessation of hostilities.

Key Aspects of Trump's Approach:

Immediate Ceasefire and Hostage Release: Trump has set a firm deadline, demanding that Hamas release all hostages by January 20, 2025—the day of his inauguration. He has warned of severe consequences if this condition is not met.

Deployment of Envoys: Trump's Middle East envoy, Witkoff, is currently in Doha, Qatar, engaging in negotiations to broker a ceasefire between Israel and Hamas. These efforts aim to end the 15-month-long war and secure the release of hostages before the inauguration.

Pressure on Israeli Leadership: Trump has communicated to Israeli PM Netanyahu his desire for the Gaza war to conclude promptly. He has expressed support for any measures that lead to peace, indicating a willingness to back initiatives that achieve this goal.

Potential Consequences for Non-Compliance: Trump has issued stern warnings, threatening severe repercussions if Hamas fails to release the hostages by the specified deadline. This approach underscores his commitment to resolving the crisis swiftly.

While these efforts are underway, challenges remain, including disagreements over the specifics of prisoner exchanges and the status of hostages. The situation is evolving, and the effectiveness of Trump's strategy will become clearer as the inauguration date approaches. Trump's approach to achieving a ceasefire and long-term peace in Gaza reflects his administration's historical positions and recent developments.

Trump's Gaza/PA Peace Plan: His previous peace initiative, known as "Peace to Prosperity," aimed to outline terms for resolving the Israeli-Palestinian conflict. Although it was rejected by Palestinian leaders for being biased towards Israel, it remains a framework that Trump may reference in current negotiations. The plan proposed economic incentives and land swaps but did not explicitly endorse a two-state solution.

Balancing Act: Support for Israel vs. Palestinian Rights: Trump's strategy involves balancing unwavering support for Israel with recognition of Palestinian rights. He has previously acknowledged the need for Palestinian self-governance but has faced skepticism from Palestinian leaders due to his policies, including the controversial relocation of the U.S. embassy to Jerusalem.

Future Implications: Potential for Annexation: Some geopolitical analysts warn that Trump's return could lead to further entrenchment of Israeli control over Palestinian territories, including potential annexation of parts of the West Bank if it facilitates a ceasefire in Gaza. This could complicate any genuine efforts toward establishing lasting peace.

In summary, Trump's proposed solution for a Gaza ceasefire involves immediate military threats against Hamas, leveraging negotiations for hostage releases, and potentially revisiting elements of his previous peace plan while navigating complex political dynamics within Israel and among Palestinian factions.

Eventually, Israel has to accept the West Bank as a fully sovereign country responsible for its internal and also external securities to prevent any further militant activities towards Israel and to prevent Gaza/West Bank/ PA as a haven for militant organizations/terrorists of a global scale. On the other hand, Israel has to accept the West Bank/Palestine population as a sovereign part of the country and a non-negotiable part & parcel of Israel, free of any external/foreign interference.

This would be like the present Kashmir state to India. Kashmir is now a part & parcel of India, free of any external influence, at least officially. Kashmir is an internal issue of India, not of any foreign countries. POK (Pakistan-occupied Kashmir) is also now an internal/integral part of Pakistan, which is responsible for all acts of POK.

Israel can’t swim on two boats at the same time keeping PA a halfhearted semi-autonomous region and potentially making it the capital/country of global terrorists. If Israel can’t accept the PA fully as an integral part of the country due to demographic/religious reasons and other domestic political compulsions, it should allow the PA as a fully independent sovereign country with its currency note and fully functional internal police and external military force. Still, that happens, a fully functional UN military/security should ensure peace in the PA/West Bank; otherwise, this legacy issue of the Gaza war may linger more in the coming days.

Meanwhile, oil also soared 4% to almost $77.85 Friday, the highest since Oct’24 in anticipation of fresh U.S. sanctions on Russia's oil sector, sparked concerns about global supply disruptions. The U.S. Treasury's sanctions target Russian oil producers Gazprom Neft and Surgutneftegas, as well as over 180 vessels, oil traders, and energy officials, aiming to restrict Russia’s oil trade and escalate geopolitical risks. Additionally, colder U.S. weather has heightened demand for heating fuels, further supporting oil prices.

Late Friday, the U.S. Department of the Treasury's Office of Foreign Assets Control (US OFAC) formally notified in a press release that fresh sanctions would be imposed on Russia's energy sector. The US OFAC explained that it took "sweeping action" to fulfill the G7 commitment to hit Russian energy revenues, which encompasses the blocking of two major Russian oil producers. The United Kingdom also joined Washington in restricting the two major oil manufacturers, PJSC Gazprom Neft and Surgutneftegas.

The US Treasury Intensifies Sanctions Against Russia by Targeting Russia’s Oil Production and Exports:

New energy sector determination targets Russia’s primary revenue source with sanctions against Gazprom Neft and Surgutneftegas, more than 180 vessels, and dozens of oil traders, oilfield service providers, insurance companies, and energy officials

“Today, the U.S. Department of the Treasury took sweeping action to fulfill the G7 commitment to reduce Russian revenues from energy, including blocking two major Russian oil producers. Today’s actions also impose sanctions on an unprecedented number of oil-carrying vessels, many of which are part of the “shadow fleet,” opaque traders of Russian oil, Russia-based oilfield service providers, and Russian energy officials. Today’s actions are underpinned by the issuance of a new determination that authorizes sanctions pursuant to Executive Order (E.O.) 14024 against persons operating or having operated in the energy sector of the Russian Federation economy. These actions substantially increase the sanctions risks associated with the Russian oil trade.”

The outgoing US Treasury Secretary Yellen said:

·         Today's actions also impose sanctions on an unprecedented number of oil-carrying vessels, many of which are part of the 'shadow fleet,' opaque traders of Russian oil, Russia-based oilfield service providers, and Russian energy officials

·         The US is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine.

·         This action builds on, and strengthens, our focus since the beginning of the war on disrupting the Kremlin’s energy revenues, including through the G7+ price cap launched in 2022. With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports

On Friday (20th Jan 25), the outgoing Biden admin implemented its ‘most extensive sanctions’ to date on Russia's oil industry, aiming to diminish Moscow's capacity to finance its military activities in Ukraine.

Key Components of the Oil Sanctions:

Targeted Entities: The sanctions focus on major Russian oil companies, including Gazprom Neft and Surgutneftegas, as well as 183 vessels involved in transporting/exporting Russian oil.

Scope: These measures encompass a broad spectrum of the Russian oil trade, affecting producers, traders, tankers, and insurance firms associated with the industry.

Potential fresh impact on Europe as an energy import-heavy economy:

Energy Security Concerns: European nations are likely to face challenges in securing alternative energy sources to replace Russian oil, which has historically been a significant part of their energy mix.

Energy Supply: Europe has been progressively reducing its dependence on Russian oil since the onset of the Ukraine conflict. The new sanctions are expected to further limit Russian oil imports, compelling European nations to seek alternative energy sources, such as from the US. The recent surge in oil prices could exacerbate energy costs for European consumers and industries.

 

Impact on Indian and Chinese Refiners:

Refining Dynamics: Indian and Chinese refiners have been earning windfall profits, being significant players in processing Russian oil, often purchasing it at discounted rates due to sanctions on direct sales to Western markets. The new U.S. sanctions may complicate these transactions by targeting the tankers and traders involved in transporting Russian oil.

Supply Chain Disruptions: India and China have become significant purchasers of Russian crude oil, especially after European markets imposed sanctions/restrictions. The latest U.S. sanctions, targeting vessels and insurance providers involved in Russian oil transport, are likely to disrupt these supply chains.

Operational Challenges: Indian refiners, in particular, may face difficulties as they might avoid engaging with sanctioned tankers or insurers to prevent potential repercussions. This could lead to a reduction in Russian oil imports, affecting refinery operations and profitability.

Re-Export Russian sanctioned oil to Europe:

Indirect Imports: There have been instances where Russian oil, after being refined in countries like India and China, is re-exported to Europe as petroleum products. The new sanctions aim to close such loopholes by targeting a wider network of entities involved in the Russian oil trade. There is a possibility that after refining, Indian and Chinese refiners could re-export the processed oil to Europe or other markets while attempting to navigate (bypass) the sanctions landscape. However, this could expose them to secondary sanctions if they are found to be facilitating trade that circumvents U.S. restrictions.

Compliance Measures: European regulators are expected to enhance scrutiny to ensure that imports do not indirectly finance Russia's oil sector, aligning with the broader objectives of the sanctions.

Adaptation Strategies: Such Indian and Chinese refiners may need to adapt by establishing new trading entities or routes to avoid detection under the sanctions regime, as many traders have done since the onset of previous sanctions. This could lead to a re-emergence of trading companies under different names or structures.

Conclusion:

The latest U.S. sanctions on Russia's oil industry are poised to have significant repercussions across global energy markets. Europe may face increased energy costs and supply challenges, while Indian and Chinese refiners could encounter operational disruptions. The measures also seek to prevent the indirect flow of Russian oil into Europe, reinforcing the international community's stance against Russia's actions in Ukraine. The latest U.S. sanctions on Russian oil present a significant escalation in efforts to curtail Russia's revenue from oil exports, particularly as funding for its military actions in Ukraine remains a critical concern.

The sanctions specifically target major Russian oil companies along with over 180 vessels involved in transporting oil. This marks an expansion of previous sanctions and aims to disrupt Russia's oil production and distribution networks significantly. The U.S. Treasury has prohibited U.S. petroleum services supporting Russian extraction and production, effective from late February 2025. This move is designed to increase the risks associated with trading Russian oil and further isolate Russia economically.

The UK has also introduced similar sanctions, reinforcing the international coalition against Russian energy revenues. This coordinated effort underscores the commitment of Western nations to diminish Moscow's financial capabilities amid ongoing military aggression in Ukraine.

The latest U.S. sanctions on Russian oil are poised to have significant repercussions for global energy markets, particularly affecting European energy security and altering the dynamics for Indian and Chinese refiners engaged in processing Russian crude. As these countries navigate the complexities of compliance with international sanctions, the overall impact on global oil supply chains will continue to evolve.

President-elect Donald Trump, who takes office later this month, has promised to stop the war in Ukraine. Harsher sanctions on Russian oil exports could give Trump more leverage in future peace talks as Moscow depends on oil exports to sustain its economy and fund the conflict. Indian refiners will refrain from taking Russian oil in tankers under sanctions or in ships insured by Russian insurers that are under sanctions, the Indian refining sources said, asking not to be named. The U.S. Treasury would allow a transition period to March 12, allowing some energy-related transactions to be completed.

Also, the latest US sanctions could push prices for Russian oil below $60 per barrel, at which point Western shippers and insurers will be able to transport the ‘sanctioned oil’ under a price cap mechanism imposed by the West/G7. Overall, the latest US/G7 sanctions on Russian oil may be designed to bring down Russian oil prices below the $60 Western cap, so that Europe and other importers continue to get Russian oil cheaply and abundantly directly or indirectly. Trump may also follow this strategy of cheap/affordable Russian oil at abundance as eventually, Saudi Arabia and even the U.S. or the rest of OPEC+ producers can’t replace 9 mbpd of Russian oil supply and 5 mbps of Russian global export of oil.

Market Impact:

Wall Street Futures slumped Friday on fading hopes of the next Fed rate cut in March’25 after hotter than expected US NFP/BLS job data, less dovish Fed talks and the latest FOMC minutes. Also, potentially higher global oil prices in the coming days amid harsher US sanctions may cause elevated inflation, although the overall G7/US sanctions on Russian oil may be also designed to bring down/keep Russian oil below the $60 crucial Western price cap, so that it could be exported by Russia globally, ensuring sufficient oil supply and price stability. But so far this G7/US strategy has effectively failed to keep Russian oil below $60 even when global oil is hovering around $70-65 as Russia may simply threaten to stop all types of oil export below $60, which is itself enough to fire oil above $85!

At below $60 break-even prices, Russia will also find it quite tough to generate enough profit/revenue out of oil exports to fund its never-ending Ukraine war. This may also ensure additional leverage for incoming US President Trump to pressurize Putin for an immediate Ukraine war ceasefire. Anyway, on Friday oil surged to almost $78 in anticipation of US sanctions on Russian oil, but it stumbled to almost $75.35 before closing around $76.50 after actual US action/sanction. Russian Ural grade crude oil closed around $72.35 against global WTI crude oil 76.50.

On Friday, Gold was resilient despite fading hopes of a more than 50 bps Fed rate cut in 2025. Gold was boosted by lingering Gaza war tensions as it’s now becoming almost clear that despite ongoing best efforts by all concerned stakeholders, the much-awaited Gaza war ceasefire may not be possible by 20th Jan’25, Trump inauguration day, and Trump’s ultimatum for Hamas. But Gold also stumbled from $2698 to $2685 late Friday after the US NSC/White House expressed confidence about an imminent Gaza war ceasefire before Biden leaves the White House.

On Friday, US stocks closed sharply lower. The S&P 500 (SPX 500) and Nasdaq 100 (NQ 100) both dropped 1.5%, while the Dow Jones (DJ 30) plunged almost 700 points. Wall Street was dragged by real estate, financials, techs, consumer staples, industrials, communication services, materials, consumer discretionary, healthcare, and utilities, while boosted only by energy amid higher oil prices.  Dow Jones (DJ-30) was dragged by Travelers, Goldman Sachs, American Express, Nvidia, Caterpillar, Salesforce, 3M, and Apple, while supported by Chevron, Walmart, Home Depot, and Boeing. On the corporate front, Delta Air Lines and Walgreens soared after earnings beat.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, Gold and oil

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 42200) now has to sustain over 41800-41600 for any recovery and rally to 43000/43350-43800/45500 in the coming days; otherwise sustaining below 41600, DJ-30 may further fall to 41200/40600-40400/40000 in the coming days.

Similarly, NQ-100 Future (20990) has to sustain over 20700-21000 for recovery and rally to 21500/21900-22250/222500 and further 22700-23000/23300 in the coming days; otherwise, sustaining below 20700, NQ-100 may further fall to 20500/20300-20100/19250 in the coming days.

Technically, SPX-500 (CMP: 5865), now has to sustain over 5950 for any further recovery/rally to 6025/6050-6150/6200 and 6350/6500 in the coming days; otherwise, sustaining below 5925-5900, SPX-500 may further fall to 5800-5775 and 5700/5600-5475 in the coming days.

Also, technically Gold (CMP: 2690) has to sustain over 2705 for a further rally to 2725 and further 2735/2750-2775/2795 and 2815 in the coming days; otherwise sustaining below 2700-2685 may again fall to 2655/2620-2605/2600 and 2595/2575-2535/2435 in the coming days (depending upon Fed rate cuts, Gaza/Ukraine war trajectory); Gold surged almost 75% in the last one year since Gaza war started back in October’23. Now it may retrace to $2500-2400 levels if Trump indeed can mediate both the Gaza and Ukraine war ceasefire by early 2025.

Technically Oil (76.50) now has to sustain over 76.00 for 79.00/80.00 and any further rally to 82.00/85.00-88.00/90.00 and 91.00-95.00; otherwise sustaining below 75.50-73.50, oil may again fall to 73.00/72.00 and 71.00/70.00-69.00/67.00 and further fall to 66.00/65.00*-62.00/60.00 in the coming days.