Markets Retreat as Trump’s Greenland Gambit Threatens Transatlantic Alliance

Jan 19, 2026 - 11:00

FTSE 100 shows resilience while domestically-focused FTSE 250 plunges deeper into red as investors assess tariff impact on UK economy—gold smashes through $4,666 and silver hits $93 amid intensifying safe-haven demand

President Trump has doubled down on his ambitions to take control of Greenland, causing unease to spread across financial markets as the transatlantic alliance faces its gravest crisis since NATO’s 1949 founding. The FTSE 100 retreated Monday morning following weekend moves by Washington to impose fresh onerous duties on Denmark and its European allies, opening 64 points lower at 10,194 after closing Friday at 10,235.

The blue-chip index has shown more resilience than the domestically focused FTSE 250, which opened deeper into the red as investors assessed the potential impact of fresh tariffs on the UK economy. The FTSE 100’s defensive nature—stuffed with multinationals focused on defence contractors, mining giants and consumer staples—has proven beneficial amid heightened uncertainty, with the index limiting losses to 0.4% while continental European bourses suffered steeper declines.

Ugly Turn for Transatlantic Relations

Trump has described tariffs as “the most beautiful word in the dictionary,” but these latest moves mark an ugly turn of events given they drive a wedge through the transatlantic alliance. The president announced Saturday that Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland would face 10% tariffs beginning February 1, escalating to 25% by June 1 unless Copenhagen agrees to sell Greenland to Washington.

Investors are nervous about a deeper trade war breaking out, though hopes persist that room exists for negotiation. Memories of the 2025 “TACO trade” remain strong—with Trump Always Chickening Out of the most punishing tariff threats—but threatening to seize territory from a fellow NATO country represents a dramatic escalation that markets cannot easily dismiss. European capitals entered emergency consultations Sunday, with the EU weighing retaliatory tariffs on up to €93 billion ($107.7 billion) of American goods.

Hargreaves Lansdown’s Derren Nathan characterized it as “an extraordinary weekend of economic sabre-rattling over Greenland,” noting the mooted European Union response includes deployment of the never-before-used Anti-Coercion Instrument, which would further limit US companies’ access to major contracts across the single market. UK Prime Minister Keir Starmer addressed the nation at 2:30pm Monday after reiterating opposition to Washington’s Greenland ambitions in a Sunday call with Trump.

Precious Metals Hit Record Highs

Gold has smashed through fresh record highs on its glittering run upward, with spot prices surging more than 1.5% to $4,666 per ounce Monday morning. The precious metal is holding even more allure as a safe haven as worries spread about repercussions of aggressive US trade and geopolitical policies. The yellow metal has now rallied over 75% since trading around $2,640 in January 2025, with experts at Goldman Sachs and JP Morgan Private Bank forecasting the $5,000 level could be breached by year-end 2026.

Silver has risen even more sharply, with investors piling into the asset and pushing its winning streak to record levels—up almost 4% Monday to above $93 an ounce. The white metal is seen as both a safe haven among investors wanting to shelter assets and an industrial play given manufacturing demand, particularly for AI technology, electric vehicles and renewable energy applications. Silver has now gained 26% year-to-date after posting a 150% rally through 2025, with the Gold/Silver Ratio collapsing to barely 51 ounces of silver per ounce of gold—the lowest since November 2012.

China’s December export controls on silver have created supply constraints that are pushing physical premiums to $10 above spot prices in Shanghai, according to Jupiter Asset Management’s Ned Naylor-Leyland. “Silver is basically disappearing now to China and India,” he told CNBC, adding that the silver market is now dominated by physical bar demand, implying prices can go “substantially” higher from current levels.

Strategic Diversification Accelerates

European leaders are standing firm in their opposition to Trump’s territorial ambitions. French President Emmanuel Macron is set to request activation of the EU’s anti-coercion tool, which could see US goods banned from the single market—representing 15% of global trade. Even without this measure enacted, the chaotic nature of doing business with the United States means many European companies will be looking to diversify income streams and find new customers in less problematic nations.

The slow shift away from the US amid intense uncertainty is likely to gather steam. It’s a strategy China has been pursuing successfully—Beijing’s exports rose more than expected last year, enabling it to hit 5% growth targets as new trading relationships were forged across Asia, Africa and Latin America. The Greenland crisis is likely to heighten calls for Britain to forge closer trade ties with the EU to offset damage wreaked by US tariffs, particularly as the domestically-focused FTSE 250 appears more vulnerable to transatlantic trade disruption than the internationally diversified blue-chip index.

The dollar has fallen back against a basket of currencies as investor confidence in the reserve currency slips again. The euro firmed 0.26% to $1.1628 after initially dropping to its lowest since November, while the Swiss franc and other safe-haven currencies advanced. This represents a notable shift—typically geopolitical uncertainty drives dollar strength, but the Federal Reserve independence crisis has inverted traditional relationships.

Treasury Market Tremors and Inflation Concerns

US markets are shut Monday for the Martin Luther King holiday, but futures markets indicate equities are set for falls once trading resumes. The Dow Jones futures pointed 0.5% lower while S&P 500 futures declined 0.2%, with technology-heavy Nasdaq futures down 0.8%. Investors will also be keeping a close eye on the direction of US Treasury yields, which have crept higher as investors demand greater compensation to hold American debt.

The Federal Reserve independence crisis—triggered by the Department of Justice’s criminal investigation of Chair Jerome Powell—has sparked widespread concerns about the future of US monetary policy. Rumors suggest Powell’s successor could be Kevin Warsh, who is believed to favor lower interest rates in line with Trump’s preferences. Yet fresh tariffs on European goods are likely to raise inflationary pressures significantly.

Higher prices are inevitable for US businesses and consumers across vast product categories—from automobiles and olive oil to chemicals, aircraft and medical devices. European automakers including BMW were among Monday’s hardest-hit stocks, with the sector declining sharply on fears that 25% tariffs would devastate transatlantic supply chains. This creates renewed concerns about the effectiveness of US monetary policy in keeping a lid on hot inflation, which could see Treasury yields creep up even further, increasing costs of servicing America’s $38 trillion debt mountain.

Peel Hunt economist Kallum Pickering noted that while the initial market reaction has been “modest, albeit directionally telling,” with gold, silver and government bonds rising while equities and the dollar fell, “markets could rebound or move lower depending on what Europe decides to do and whether the mood between the US and Europe at this week’s World Economic Forum is conciliatory or antagonistic.”

Chancellor Rachel Reeves withdrew her scheduled appearance at the London Stock Exchange Monday morning—where she was due to celebrate a “new golden age” for the City and new FTSE record highs—to attend Starmer’s press conference on the Greenland crisis. The timing proved awkward as tariff jitters triggered the index dip, though property data provided a rare bright spot: Rightmove reported average house prices jumped £9,893 (2.8%) in January, the largest monthly increase since June 2015.

As markets await clarity from Davos discussions this week, the fundamental question remains whether Trump’s transactional approach to alliances represents negotiating theatre or genuine intent to restructure the post-1945 global order. For now, investors are voting with their wallets—piling into precious metals and defensive assets while reducing exposure to transatlantic risk.