Global financial markets have been thrown into fresh turmoil following a renewed threat from former US President Donald Trump to take over Greenland, sending indices across Europe and Asia into a sharp downward spiral.
Markets Plunge as Tensions Escalate
The FTSE 100 Index in London dropped more than 120 points shortly after opening on Tuesday 20 January 2026, marking a steep 1.3% decline to 10,068.4. This followed a 0.4% fall on Monday, indicating a deepening sell-off. The panic was not confined to the UK, with European indices also deep in the red. Germany's Dax was down 1%, while France's Cac 40 fell 0.9% in early trading.
The sell-off mirrored sharp overnight declines in Asian markets, setting a grim tone for the trading day. The catalyst was a series of posts on Trump's Truth Social platform, where he reiterated his ambition to acquire the Arctic territory of Greenland, which is an autonomous part of Denmark, a key NATO ally. He accompanied his statements with a picture of himself holding a US flag on Greenland, suggesting the territory would be owned by the US this year.
Trump's Tariff Threats and Davos Focus
Adding fuel to the fire, on Saturday, Trump threatened to impose tariffs of up to 25% on nations, including the UK, that do not support his Greenland plans. The former president, who is travelling to Davos, Switzerland, for the World Economic Forum, stated there was "no going back" on his pledge. He also announced plans to hold a Greenland meeting at the forum, following what he described as a good conversation with NATO Secretary General and former Dutch Prime Minister Mark Rutte.
Kathleen Brooks, research director at XTB, highlighted the uncertainty. "What happens next for financial markets will ultimately depend on President Trump’s actions in the coming days," she said. "Thus, the meeting in Davos later this week will be critical."
Safe Havens Rise as Equities Fall
As investors fled risky assets, they piled into traditional safe havens. Gold prices soared to a new record high of $4,728 (£3,507) per ounce during Tuesday morning trading. Meanwhile, US markets, closed on Monday for Martin Luther King Jr Day, were poised for steep falls with futures trading pointing sharply lower ahead of Tuesday's reopening.
The turbulence extended to bond markets, where yields on UK Government bonds (gilts) edged higher amid a wider sell-off. This was partly triggered by a plunge in Japanese government bonds following news of a snap election to be held there on 8 February. In currency markets, the pound rose 0.4% against a weak US dollar to $1.348, but fell 0.3% against the euro to €1.15.
