Regional spotlights
BLACK SEA/UKRAINE: Energy Warfare Escalates as Peace Talks Resume
Assessment: Russia’s February 3 mass strike on Ukrainian energy infrastructure—the largest attack of 2026—contradicts claims of temporary truce adherence and signals Moscow’s intent to maintain coercive pressure during Abu Dhabi negotiations. Winter energy warfare continues to be Putin’s primary asymmetric tool. (High Confidence)
Key Developments: - “Worst Damage” Strike: Russia launched 71 missiles and 450 drones on Feb 3, causing what Ukrainian Energy Minister Shmyhal called “some of the worst damage we have seen” during the full-scale war - Civilian Toll: At least 7 killed in Druzhkivka market cluster munition attack Feb 4; Feb 1 drone strike on miners’ bus killed 12; maternity ward in Zaporizhzhia struck, 2 teenagers killed Feb 3 - Infrastructure Impact: 1,142+ apartment blocks in Kyiv without heating; power plants in Kyiv and Kharkiv severely damaged; iconic Motherland monument damaged in Kyiv strike - Trump’s Contradiction: Trump defended Putin saying he “kept his word” on energy truce despite attacks occurring immediately after purported ceasefire expired Sunday - Abu Dhabi Talks: Second round of trilateral negotiations resumed Feb 4 in UAE with Ukrainian negotiator Rustem Umerov, US envoy Steve Witkoff, and Russian representatives
Tactical/Operational Details: - Russian forces captured villages of Zelene (Kharkiv Oblast) and Sukhetske (Donetsk Oblast) - Ukrainian forces regained positions in Kupiansk per DeepState mapping project Feb 3 - Elon Musk confirmed SpaceX stopped Russia’s “unauthorized” use of Starlink on long-range drones - Ukraine received bodies of 1,000 soldiers from Russia in latest exchange Jan 29
Implications: Russia’s timing of maximum energy infrastructure attack immediately before peace talks reveals strategic intent to negotiate from position of Ukrainian civilian suffering. Trump administration’s public defense of Putin despite visible violations may embolden further Russian escalation. Ukraine faces acute humanitarian crisis with sub-zero temperatures (-30C forecast) and compromised heating/electricity systems. Air defense ammunition shortages reported by Ukrainian Air Force spokesman Ihnat, with some systems “depleted and not ready.”
Outlook (24-72h): High probability of continued energy strikes despite peace talks. Monitor for Ukrainian retaliatory deep strikes on Russian oil infrastructure. Assess whether Abu Dhabi talks yield any substantive territorial discussion or focus solely on peripheral confidence-building measures. Denmark and Sweden announced Feb 3 procurement of additional Ukrainian air defense systems.
IRAN: Regime Faces Existential Crisis Following January Massacres
Assessment: The Islamic Republic confronts its gravest internal threat in decades after security forces killed over 6,800 protesters in January 2026, triggering international condemnation, former leaders’ public dissent, and accelerating regime delegitimization. Khamenei’s acknowledgment of “thousands” killed indicates unprecedented crisis management failure. (High Confidence)
Key Developments: - Death Toll Controversy: Human Rights Activists News Agency (HRANA) verified 6,842 deaths (6,425 protesters, 146 minors, 214 security forces) as of Feb 1; investigating 11,280 additional cases. Iran International documented 6,634 named victims with fewer than 100 overlapping with regime’s official list of 2,986 - Regime’s Official Claims: Government claims 3,117 total deaths (2,447 civilians/security forces, remainder “terrorists”); critics cite mass graves, concealed burials, and unidentified bodies suggesting far higher toll - Former Leaders’ Dissent: Ex-PM Mir Hossein Mousavi (under house arrest since 2009) called massacres a “catastrophe” to be remembered “for decades, if not centuries”; Ex-President Khatami and Mehdi Karroubi issued damning critiques - Rapid Judicial Response: Chief Justice Mohseni Ejei ordered “no leniency” for “rioters,” stating “If we want to do something, we have to do it quickly”; undisclosed number charged with “moharebeh” (waging war against God), punishable by death - Chemical Weapons Reports: Jan 17 footage showed security forces in hazmat suits; victims died days after exposure; detained protesters forcibly injected with unknown substances linked to deaths in custody
Economic Collapse Context: Iranian rial hit 145,000 tomans per USD (56% depreciation in 6 months); food prices soared 72% year-over-year; electricity/gas disruptions preceded protests
International Response: - UK Sanctions: Feb 2 designation of 10 individuals and 1 organization, including Interior Minister and IRGC members, for human rights violations - EU IRGC Listing: European Union terror-listed Islamic Revolutionary Guard Corps, described as “strategic blow to core of Iran’s religious fascism” - US Position: Trump administration considering “strong options” in response to crackdown; 25% tariffs threatened on nations trading with Iran
Implications: Regime’s inability to contain information flow despite internet blackout indicates technological/organizational degradation. Former establishment figures’ public condemnation signals elite fracturing unprecedented since 1979 revolution. Khamenei’s direct acknowledgment of thousands killed represents abandonment of plausible deniability strategy. Economic sanctions compounding internal economic collapse create compound pressure vector.
Energy Security Nexus: Iran produces 3.3M bpd; potential supply disruption from labor strikes, infrastructure attacks, or regime instability adds $3-5/bbl risk premium to oil markets.
Outlook (24-72h): High probability of continued low-level protests and targeted killings. Monitor for oil worker strikes or attacks on energy infrastructure. Assess clerical establishment’s cohesion as additional former officials potentially break silence. Watch for IRGC internal discipline measures against potential defections.
LEVANT: Israel–Lebanon Ceasefire Collapses in Practice
Assessment: The November 2024 US-brokered ceasefire exists only nominally, with Israel conducting sustained military operations throughout southern Lebanon and UNIFIL documenting 11,000+ violations. Hezbollah’s strategic restraint (only one retaliatory strike in 14 months) reflects organizational weakness, not ceasefire compliance. (High Confidence)
Key Developments: - Casualty Figures: 330+ killed in Lebanon since ceasefire, including 127+ civilians; Israeli strikes killed 7 in Jan 26-Feb 1 period alone; Feb 1 strike in Aqmata-Luwayza wounded 13 - Recent Strikes: Feb 2 Israeli attacks on Kfar Tibnit and Ain Qana following evacuation warnings hit alleged weapons storage; Feb 2 Ansariyeh strike killed 1, wounded 4; senior Hezbollah air defense operative Ali al-Hadi Mustafa al-Haqqani killed Feb 2 in Harouf - UNIFIL Violations: UN peacekeepers documented 10,000+ Israeli ceasefire violations (7,500 airspace, 2,500 ground); Feb 3 UNIFIL accused IDF of dropping “unknown chemical substance” near Blue Line, delaying observer activities 9 hours - Displacement Crisis: 64,000+ Lebanese remain displaced 14 months post-ceasefire; reconstruction blocked by Israeli targeting of construction equipment; minimal support from government or Hezbollah - Hezbollah Restraint: Group launched only one attack since Nov 2024 ceasefire (December rocket fire on Israeli post, no casualties); Israel responded by killing 11
Strategic Context: - Disarmament Stalemate: Lebanese Army completed “first phase” south of Litani but Israel assesses efforts “insufficient”; Hezbollah leader Naim Qassem rejected Phase 2 disarmament unless Israel abides by ceasefire - LAF Chief Washington Visit: General Rodolphe Haykal in Washington Feb 3-5 to brief on disarmament efforts; previously cancelled November visit after criticizing Israel - Israeli Occupation: IDF maintains troops in five strategic border positions despite withdrawal commitments - February Diplomatic Push: Paris international conference for Lebanese Army support scheduled March; LAF Phase 2 disarmament plan due February
Implications: Israel’s sustained operations demonstrate determination to prevent Hezbollah reconstitution regardless of diplomatic agreements. Hezbollah’s weakness following 2024 leadership decapitation and Syrian regime fall constrains response options. Lebanese Army faces impossible mandate: disarm Hezbollah while Israeli strikes continue and without confronting armed group directly (civil war risk). Assad regime fall disrupted Hezbollah’s Iran supply route. President Aoun navigating “tightrope” between US pressure to disarm Hezbollah and domestic stability concerns.
Outlook (24-72h): Moderate probability of Israeli escalation if Phase 2 disarmament plan deemed inadequate. Monitor Haykal’s Washington meetings for US pressure indicators. Assess for Hezbollah tactical response if civilian casualties spike. Lebanese political stability dependent on avoiding LAF-Hezbollah confrontation.
SOUTH CHINA SEA: Philippines ASEAN Chair Faces Code of Conduct Deadline
Assessment: Manila’s assumption of 2026 ASEAN chairmanship occurs at moment of heightened PRC coercion, with Philippines prioritizing South China Sea Code of Conduct finalization by July 2026 despite low probability of substantive agreement given PRC-Philippines tensions. (Moderate to High Confidence)
Key Developments: - ASEAN Chairmanship: Philippines assumed rotating chair for 2026; President Marcos identified finalizing Code of Conduct as top priority, coinciding with 10th anniversary of 2016 arbitral award - Recent US-Philippine Exercises: Jan 25-26 Maritime Cooperative Activity near Scarborough Shoal involved USS John Finn, P-8A Poseidon, BRP Antonio Luna, A-29 Super Tucano, FA-50 fighter; 11th such exercise since Nov 2023 - PRC Response: Southern Theater Command criticized Philippines for “disrupting peace and stability”; 4 Chinese warships (2 destroyers, frigate, replenishment ship) transited Miyako Strait Jan 28-29 following exercise - Domestic Political Crisis: Marcos facing all-time low approval ratings; $1.76B corruption scandal allegations; calls for resignation amid economic downturn and typhoon response failures - Joint Activity Tempo: 500+ US-Philippines military activities planned for 2026, representing significant escalation
Code of Conduct Sticking Points: - Legal Implementation: Philippines demands legally binding agreement monitored by ASEAN mechanisms; China opposes - External Alliances: Beijing proposes banning joint military drills with non-Southeast Asian countries; ASEAN members rejected - Resource Exploitation: Chinese proposals to limit oil/gas exploration remain contentious - Internal ASEAN Division: Member states’ competing/overlapping claims undermine united front
Philippine Strategy Assessment: - Marcos delivered “strong” remarks at October ASEAN Summit criticizing “dangerous maneuvers and coercive use of tools” without naming China - Actions suggest defense partnerships with US/allies prioritized over ASEAN consensus for deterrence - Enhanced Defense Cooperation Agreement fast-tracked; new US bases facing South China Sea/Taiwan Strait established - Japan’s Reciprocal Access Agreement activated September 2025, granting JSDF legal clearance for operations
Implications: Philippines attempting to balance ASEAN diplomatic leadership with bilateral defense partnerships, but fundamental contradiction exists between ASEAN neutrality principles and Manila’s alliance posture. Marcos’s domestic political vulnerability constrains foreign policy bandwidth. Six identified conflict risks: (1) lowering threshold for open conflict via death-as-casus-belli rhetoric, (2) normalization of violent skirmishes, (3) escalation spirals from water cannon/ramming incidents, (4) entanglement with Taiwan contingency (Marcos acknowledged Philippines would be drawn in “kicking and screaming”), (5) miscalculation from multi-actor involvement, (6) PRC testing of US mutual defense treaty obligations.
Outlook (24-72h): Low probability of substantive Code of Conduct progress given China-Philippines temperature. Monitor for additional confrontations during Philippine resupply missions. Assess ASEAN member statements for unity/division signals. Watch for PRC pressure tactics targeting Marcos’s political vulnerabilities.
AFRICA: Sudan Conflict Intensifies; Sahel Deterioration Continues
Assessment: Brief updates indicate continued trajectory of Sahel insecurity under military juntas and Sudan’s worsening humanitarian catastrophe, though overnight reporting less granular than other theaters. Previous assessments remain valid. (Moderate Confidence)
Sudan Snapshot: - RSF maintains territorial advances in Kordofan region captured in December-January period - Humanitarian access severely constrained; famine conditions in besieged areas - Drone warfare between RSF and Sudanese Armed Forces continues - Regional spillover concerns persist following Chad border incident
Sahel Snapshot: - 22,300+ fatalities linked to militant Islamist groups in Africa over past year, with Sahel accounting for 55% - Security continues to deteriorate under Mali, Burkina Faso, Niger military juntas - Russia’s Africa Corps (formerly Wagner) maintains presence conducting operations in Mali, Burkina Faso, CAR
Assessment: Insufficient overnight OSINT to warrant full spotlight section; theater remains medium-priority watch item with high humanitarian concern.
Annex: business/financial indicators & implications
Energy Markets Overview
Oil Prices (Current Range): - WTI Crude: $57-60/bbl (volatile) - Brent Crude: $60-63/bbl - Geopolitical Risk Premium: Iranian instability adding $3-5/bbl; Ukrainian supply concerns minimal but insurance costs elevated
Key Drivers - February 4, 2026:
1. Iranian Instability Premium (NEW FACTOR) - 3.3M bpd at risk from labor strikes, infrastructure attacks, or regime chaos - Markets pricing modest risk premium despite no current supply disruption - Trump’s 25% tariff threat on Iran trading partners adds compliance uncertainty - UK/EU sanctions on IRGC and individuals constrains Iran’s financial maneuvering
2. Venezuelan Oversupply Potential vs. Reality - US control over oil sales theoretically unlocks 1M+ bpd - Industry skepticism high: Exxon CEO noted Venezuela “uninvestable” after assets seized twice - Infrastructure degradation requires multi-year, multi-billion dollar reconstruction - Political uncertainty under interim VP Delcy Rodríguez constrains investment
3. Ukrainian Grain Export Disruption - Black Sea shipping insurance premiums elevated - 70%+ of pre-war Ukrainian export capacity threatened - Alternative Danube/rail routing insufficient for volume replacement - Wheat/corn futures pricing in continued uncertainty
4. Demand-Side Weakness - Chinese economic slowdown constraining consumption - Tariff impacts on global trade weighing on projections - Ukrainian electricity imports up 40% in January (894 GWh) indicating external dependency
5. Oversupply Fundamentals Persist - Goldman Sachs maintains forecast: WTI could drop to $50/bbl by late 2026 citing 2.3M bpd surplus - EIA baseline: Brent averaging ~$55/bbl in Q1 2026 - Global production outpaced consumption throughout 2025
Geopolitical Risk Scenarios - February 2026
Scenario 1 - Iranian Disruption Spike (Probability: 25%, Impact: $15-20/bbl) - Oil worker strikes or major infrastructure attack - 2-3M bpd offline for 30+ days - WTI spikes to $75-80/bbl temporarily - Strait of Hormuz transit concerns escalate
Scenario 2 - Ukrainian Energy Collapse (Probability: 30%, Impact: Moderate) - Continued Russian strikes cripple remaining generation capacity - European electricity exports to Ukraine surge, straining regional grids - Humanitarian crisis intensifies, but limited direct oil market impact - Indirect effect: European natural gas demand increases for heating
Scenario 3 - Base Case Oversupply (Probability: 45%, Impact: Bearish) - Iranian production continues despite protests - Venezuelan oil remains offline due to infrastructure/political constraints - Oversupply fundamentals dominate; WTI trends toward $50-52/bbl - OPEC+ cuts insufficient to balance market
US Energy Industry Implications
Breakeven Crisis Deepening: - Dallas Fed respondents warning drilling “will cease in 2026” if prices remain sub-$60 - Small/mid-cap E&P companies face acute financial stress - Upstream capex cuts accelerating, constraining future production growth
Major Producers: - ExxonMobil: $800M-$1.2B Q4 2025 earnings reduction from price slump already reported - Chevron/ConocoPhillips: 2030 breakeven targets at ~$30/bbl increasingly relevant - Industry awaiting clarification on Trump’s $50/bbl price target policy implications
Political Paradox: - Trump benefits domestically from lower gasoline prices (consumer/voter approval) - US energy industry struggles with profitability at current levels - Tension between political optics and industry sustainability
Global Trade & Strategic Implications
Black Sea Shipping: - Major trade route (trillions annually) facing persistent disruption - Ukrainian exports constrained but functioning via alternative corridors - Russian shadow fleet continues operating despite sanctions; insurance arbitrage ongoing
South China Sea Commercial Transit: - Philippines-China tensions threaten major shipping lanes - European industries reliant on semiconductors from Asia face supply chain vulnerability - US-Philippines military cooperation tempo increase (500+ activities in 2026) signals deterrence priority
Iranian Financial Isolation: - UK/EU IRGC terror listing compounds existing US sanctions - Iranian access to international financial markets further constrained - Rial depreciation (145,000 tomans/USD) accelerating capital flight
Investment Implications - February 4, 2026
Energy Sector: - Volatility persists through Q1 2026 minimum - Iranian risk premium vs. oversupply fundamentals in tension - Opportunities in service companies supporting Ukrainian energy reconstruction (long-term)
Defense/Aerospace: - Elevated from multiple conflict theaters - US-Philippines 500+ joint activities driving regional defense spending - European rearmament (Denmark/Sweden air defense procurement for Ukraine)
Agricultural Commodities: - Wheat, corn pricing in Ukrainian export uncertainty - Iranian food price inflation (72% YoY) indicates import demand, but financial constraints limit purchasing power - Long-term: Ukrainian reconstruction will require agricultural input imports
Emerging Markets: - Debt spreads widening on multiple instability vectors - Iranian rial collapse precedent concerning for other sanctioned/fragile economies - Philippines political instability (Marcos approval at all-time low) weighing on Philippine assets
Geopolitical Hedge Assets: - Gold at all-time highs ($4,630/troy oz) reflecting compound uncertainty - Defense stocks elevated - Energy volatility creating options trading opportunities
Outlook Assessment - 72-Hour Horizon:
Most Likely: Continued volatility with slight bearish bias ($57-60 WTI range); Abu Dhabi talks unlikely to yield breakthrough; Iranian protests simmer without major disruption; Ukrainian energy crisis manageable but acute.
Upside Risk: Iranian oil supply disruption from labor action or infrastructure attack; major Russian escalation in Ukraine triggering Western energy embargo discussions.
Downside Risk: Venezuelan production restarts materialize faster than expected; OPEC+ announces surprise production increase; Chinese demand disappoints further.