European defence stocks jumped to a record high and oil prices and the dollar both made ground on Thursday, as the rumbling geopolitical tensions from Venezuela to Greenland kept traders guessing.
The seizure of two Venezuela-linked oil tankers in the Atlantic came alongside news U.S. Secretary of State Marco Rubio will meet Denmark's leaders to discuss Greenland next week, while there was some mixed economic data thrown in too.
Europe's record high STOXX aerospace and defence stocks index (.SXPARO), opens new tab jumped nearly 2% early on in a fifth straight day of gains that has already seen them surge 13% this year - and more than 260% since Russia's 2022 invasion of Ukraine.
The euro , meanwhile, was on track for its eighth straight drop against the dollar, though mixed U.S. economic data on Wednesday was keeping the dollar bulls in check ahead of Friday’s closely watched non-farm payrolls report. /FRX "What investors are realising is that the threat of geopolitics is not going away," Peter McLean, Head of Multi-Asset Portfolio Solutions at Stonehage Fleming Investment Management, said.
"While it is unlikely we see military action in Greenland there is clearly an impetus to increase defence spending in Europe."
Oil prices have slid this week on the prospect of higher Venezuelan crude output, though they recovered on Thursday, with Brent futures clawing back above $60 a barrel and U.S. crude rising 0.5% to $56.30 a barrel, Top U.S. officials said on Wednesday the country needs to control Venezuela's oil sales and revenue indefinitely to stabilise the latter's economy, rebuild its oil sector and ensure it acts in America's interests.
"The market's negative reaction to the Trump comments on controlling Venezuela's oil looks a little misplaced," said Daniel Hynes, ANZ's senior commodity strategist. "U.S. control of oil sales could actually mean ongoing sanctions or restrictions remaining in place in the short term, which would be bullish for oil prices. I suspect that is why prices are recovering."
Elsewhere, stocks mostly traded lower following a strong start to the New Year that lifted markets globally.
The broader pan-European STOXX 600 (.STOXX), opens new tab was down 0.2%. Japan's Nikkei (.N225), opens new tab lost 1.6% overnight amid rising tensions with China and Wall Street futures eased 0.2%.
"It seems the Asian markets are just taking a breather after a strong start to 2026," said Charu Chanana, chief investment strategist at Saxo.
"Geopolitical headlines are in the driver's seat," Chanana said, pointing to China's dual-use export ban to Japan, and talk of potential rare earth risk. Shares in Japanese chemical manufacturers had fallen in Tokyo although those of their Chinese rivals jumped after China's commerce ministry said it was launching an anti-dumping probe into imports of chemicals used in chipmaking.
