Weekly focus – Focus remains on geopolitics

The year 2026 started eventful - but less so in economics, and more so in geopolitics. Furthermore, over the past week, the US administration has repeated its interest in making Greenland part of the US instead of it being a largely independent part of the Danish realm. Politically, that is of course a very important issue for Denmark, but not for economic reasons. Read more in our Flash Comment Denmark - Greenland has only limited impact of the Danish economy, 7 January.

As we write in our Geopolitical Radar, we think that the most likely next target of the US administration could be Iran's Islamic regime. The bombardment in June that targeted Iran's nuclear facilities resulted in only a temporary setback for Iran's nuclear program. As the US now has access to Venezuelan oil reserves, it might be less concerned with a potential Iranian retaliation that might disrupt oil trade in the Persian Gulf, and importantly, current anti-government protests in Iran could give the US-Israeli alliance a pretext to intervene.

Come what may, thus far markets have completely shrugged off events in Venezuela. Brent oil price is up only two dollars since the US attack, and futures curve is little changed as well. The limited reaction in the oil market is understandable. Despite of having the world's largest proved oil reserves, Venezuela's share of world oil supply is a mere 1%. Furthermore, Venezuelan oil is heavy and sour, making it more expensive to process. American refineries on the Gulf Coast are equipped to process such qualities, but the more relevant question is whether it makes economic sense to invest in Venezuela. According to estimates, the breakeven oil price for new projects in Venezuela is USD 80, and as there is already excess supply in the world market, prices are expected to stay much lower in the near future.

In the first weeks of 2026 it seems focus will most likely remain on geopolitics. Large economies remain on track and have been largely immune to geopolitical turbulence. Chinese and European exports have been robust despite facing higher tariffs in the US, and American businesses and consumers are only gradually starting to pay the price. In the coming two years, we expect economic growth close to trend levels in both the US and the euro area. We expect two more rate cuts from the Fed, while for the ECB, we foresee no rate changes in the forecast horizon.

Next week's economic calendar is almost empty. In Europe, we get the euro area Sentix indicator on Monday, showing the first estimate of investor confidence in 2026. On Thursday, the German statistics agency published the first full-year 2025 GDP estimate, thereby giving the first indication of Q4 GDP growth. In the UK, November GDP data is due on Thursday. In the US, the key data release of the week will be the December CPI. The previous November release was potentially distorted by data collection delays after the government shutdown, which might have caused Black Friday discounts to have an outsized negative impact on the data. Reversal of these effects is likely to lift December CPI, and we forecast above consensus prints.

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