However, oil surprised many observers by showing little reaction. “The price of oil hasn’t really done much. It hasn’t gone down. It’s gone up a little bit,” Yardeni said. Energy stocks, and especially the large US energy companies, performed better. “Presumably they will have the opportunity to do more business in Venezuela and develop that huge oil reserve.”More telling, he said, was the lack of a risk-taking response in the broader stock market. “The stock market as a whole certainly had no safe haven or risk-off characteristics at all. Energy stocks did well, as did the financial sector and the industrial sector,” he explained, adding that this reflected investor confidence that the situation would not spiral into a wider geopolitical crisis.
However, that confidence may be premature. Yardeni warned that Washington’s newfound influence in the Western Hemisphere could cause unintended consequences elsewhere. “It will be interesting to see, now that the United States has declared that the Monroe Doctrine is back and that the Western Hemisphere is our sphere of influence, what will stop the Chinese from saying that, if that is the case, they should go to Taiwan? And what will stop Putin from saying that he doesn’t really want to resolve the war and wants all of Ukraine?”
On commodities, Yardeni said the muted reactions reflected uncertainty rather than complacency. “Commodity prices have seen a very strong rally at the end of 2025,” he told ET Now, pointing to the previous strength in precious metals and the year-end rallies in copper, nickel and tin. The markets, he said, are now assessing the next phase.
He added that fears surrounding US trade tariffs have proven to be exaggerated. “Trump tariffs have proven to be much less alarming for the global economy. Both the global and U.S. economies have proven very resilient,” he said, a trend that should support basic materials over time. Oil, on the other hand, could face downward pressure. Yardeni expects demand to remain flat, driven in part by China’s rapid shift to electric vehicles and diversified energy sources. “On the supply side, OPEC will continue to produce at current levels, and we may also get some Venezuelan oil,” he said, noting infrastructure limitations. “Supply is exceeding demand, and I wouldn’t be surprised to see Brent fall from around $60 to $50 over the next three to six months.”
On U.S. interest rates, Yardeni pushed back against expectations of upcoming cuts. He highlighted the impact of a tax law passed last July that is retroactive to early 2025 and is expected to result in unusually large tax refunds. “That will be very stimulative for consumer spending,” he said, but warned it would also worsen budget deficits. “In that environment, there is no reason for the Fed to cut rates. There is a risk that bond vigilantes could be upset by excessive fiscal and monetary stimulus.”
As a result, he believes interest rate cuts in the first half of the year are unlikely. However, Yardeni remains constructive on global markets. “Emerging markets performed very well last year. They beat the US and that may continue this year,” he told ET Now.
India, he added, remains well positioned after a period of consolidation. “India consolidated last year after a huge run-up, and I think India will perform well this year, just like last year.”
Despite geopolitical noise and policy uncertainty, Yardeni’s message was clear: markets are less focused on fear and more on fundamentals for now.
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