So, here we are again. President Donald Trump is set to deliver his first State of the Union address Tuesday night, and the financial markets are doing that thing they do: trying to read the tea leaves on tariffs, geopolitical risk, and interest rates all at once. It's a lot to unpack, but let's break it down.

The big, messy story right now is tariffs. The Supreme Court recently ruled that Trump's emergency tariffs under the International Emergency Economic Powers Act were illegal. That forced the administration to pivot, and now U.S. Customs and Border Protection has started collecting a temporary 10% global tariff under a different law—Section 122 of the 1974 Trade Act. Trump has publicly pushed to raise that to 15%, but reports indicate the CBP needs a signed order to collect more. So, we're in a bit of a limbo.

And here's where it gets interesting for markets: they're already pricing in a refund fight. Companies have filed a growing wave of lawsuits seeking tariff refunds following the court ruling. Traders have even bid up the price of "tariff refund claim" rights, according to reports, which is a pretty speculative bet considering the court didn't actually order any refunds. It's a classic case of the market trying to get ahead of a legal and political scramble.

Oil's Geopolitical Jitters

Meanwhile, over in the oil markets, everyone's watching Iran. The price of oil moved on Tuesday with Brent settling at $70.77 a barrel and U.S. crude at $65.63 as traders monitored U.S.-Iran talks and a larger American military presence in the region. The real risk premium here is tied to shipping through the Strait of Hormuz, a key chokepoint for global oil supplies. Any rhetoric that widens that risk could send prices jumping. So, if the speech leans into geopolitical tensions, oil traders will be listening closely.

The Never-Ending Rate-Cut Debate

Then there's the domestic economic story: inflation and interest rates. A report on Tuesday suggested Trump plans to emphasize the economy in his address to ease voter concerns. The latest U.S. CPI data showed prices up 2.4% over the 12 months ending January, with core CPI rising 2.5%. That's the kind of stubborn number that keeps everyone arguing about when—or if—the Federal Reserve will cut rates.

It's not just the usual analysts talking, either. Traders on prediction markets are placing their bets, expecting Trump to lean hard on patriotic language, say "America" a lot, and cite big economic figures. They also give high odds that he'll mention energy, the border, and geopolitical tensions, essentially fusing economic messaging with national security. It's a political speech, but the market is treating it as a data point.

Ahead of the speech, U.S. stock futures edged lower Tuesday night. S&P 500 futures slipped 0.05% to 6,900, Nasdaq futures dipped 0.01% to 25,025, and Dow Jones futures declined 0.07% to 49,202. Not a huge move, but a cautious tilt.

The U.S. dollar, measured by the Dollar Index (DXY), was trading flat at 97.85 at the time of writing, and is now down 0.45% for the year so far. Analysis from one bank suggests the dollar has lost part of its safe-haven appeal since 2024 after the dollar index fell nearly 10% last year, weighed down by erratic trade policy, Trump's tariff threats, and attacks on the Federal Reserve. The bank still sees no broad deterioration in global demand but warned that any perception the Fed is cutting rates inappropriately could trigger "a run on the dollar."

So, as the speech gets underway, investors are juggling a tariff mess that's creating legal chaos, oil prices that could spike on a few tough words, and an inflation story that just won't let the rate-cut debate die. It's a full plate for a Tuesday night.