Key Takeaways
- Israel launches major airstrikes on Tehran and Karaj, targeting infrastructure as the regional conflict reaches a critical escalation point.
- US forces sink the Iranian frigate Dena in international waters; Iran’s foreign minister warns of "bitter regret" for the precedent set by the strike.
- China unveils its 15th Five-Year Plan, prioritizing national security, anti-sanction measures, and a significant boost in defense spending.
- Merck KGaA (MKGAY) issues weak 2026 guidance, overshadowing its 2025 earnings and signaling potential headwinds for the pharmaceutical sector.
- Market volatility surges as aluminum prices climb 4% in Shanghai while silver drops 3% and commodity-linked currencies like the AUD and NZD slide.
Middle East Conflict Reaches Flashpoint
The conflict in West Asia escalated sharply on Thursday as Israel announced fresh attacks on infrastructure in Tehran and Karaj. Iranian state media confirmed multiple blasts in the capital region, marking a significant expansion of the direct confrontation between the two nations. Despite the proximity of the strikes, Taiwan Semiconductor Manufacturing Co. (TSM) stated it does not anticipate significant effects on its global supply chain at this time.
In a separate maritime engagement, Iran’s foreign minister reported that the frigate Dena, which was hosting approximately 130 sailors and operating near the Indian Navy, was struck and sunk by the United States in international waters. The minister condemned the action as an "atrocity" and warned that the U.S. would regret the precedent created by the unannounced strike. Meanwhile, a tanker explosion off the coast of Kuwait has resulted in a significant oil spill, further threatening regional maritime stability.
China Prioritizes Security in New Five-Year Plan
As the National People's Congress opened, China unveiled its 15th Five-Year Plan, which places a heavy emphasis on safeguarding national security and achieving lasting stability. The plan introduces robust measures to counter external sanctions, foreign interference, and "long-arm" legal actions from abroad. This strategic pivot coincides with a confirmed boost in defense spending as Beijing seeks to insulate its economy from geopolitical shocks.
The blueprint also outlines improvements to China's rules for bulk purchasing of medicines and medical consumables, aiming to streamline domestic healthcare costs. Diplomatically, Iran clarified that it has not launched missiles toward Turkey, emphasizing its respect for Turkish sovereignty despite the widening regional chaos. In response to the maritime blockades, the Malaysian trade agency has begun assisting exporters with rising shipping costs and supply chain disruptions.
Corporate Earnings and Labor Shifts
Merck KGaA (MKGAY) reported full-year 2025 earnings that met analyst expectations, with adjusted EPS of EU8.34 and net sales of EU21.10B. However, the company’s 2026 outlook disappointed investors, forecasting adjusted EPS between EU7.10 and EU8.00, well below the estimated EU8.03. Net sales for 2026 are also projected to be lower than consensus at EU20B to EU21.1B.
Deutsche Post (DHL) also released its FY/Q4 2025 results, showing a slight miss on quarterly revenue at EU22.09B compared to the EU22.23B estimate. Full-year EBIT remained stable at EU6.10B. Elsewhere in the financial sector, Morgan Stanley (MS) is reportedly moving forward with job cuts as part of a broader restructuring amid the volatile global economic environment.
Commodity and Currency Markets React
The escalating geopolitical tension triggered sharp movements across commodity and currency markets. Silver prices plummeted over 3%, closing at $80.44/oz, while the leading aluminium contract in Shanghai surged more than 4% on supply concerns. In the energy sector, Russian Ambassador Denis Alipov reiterated that Russia remains "always open" to oil supplies for India, providing a potential buffer for the South Asian nation's energy needs.
Currency markets reflected a "risk-off" sentiment, with the Australian dollar slipping 0.6% to $0.7033 and the New Zealand dollar falling 0.5% to $0.5913. Investors are increasingly seeking safe-haven assets as the combination of Middle Eastern strikes and China’s defensive policy shifts creates a complex landscape for global trade.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.