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The biggest stories this week weren’t driven by sudden surprises — they were driven by slow-building tension finally reaching the point where outcomes start to harden. A looming deadline in Washington is raising the odds of disruption.

International talks are continuing, but the realities on the ground are still shaping what’s possible. And across the economy, markets are reacting less to what happened and more to what decision-makers might do next. This Week In Review breaks down what moved, what stalled, and what could accelerate in the days ahead.

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The prospect of a partial government shutdown is growing after Senate Democrats signaled plans to block Homeland Security funding following a Minnesota shooting linked to federal immigration enforcement. Republicans are pushing back against major revisions to the funding package, leaving little time for compromise before the deadline.

A lapse in funding would disrupt border operations, visa processing, and pay for Homeland Security employees across multiple agencies. As the clock runs down, budget brinkmanship is intensifying, with leadership under pressure as shutdown standoffs often harden positions rather than encourage concessions.

Procedural tactics are becoming as important as policy differences as both parties race to avoid a funding lapse. The outcome is likely to shape immigration enforcement oversight well beyond the current fiscal fight.

Protests against federal immigration enforcement spread across multiple U.S. cities this week, with demonstrators rallying against detention practices, deportations, and the reach of federal authority. Organizers coordinated actions in major metro areas as pressure intensified on lawmakers during budget negotiations.

Crowds gathered outside government buildings, courthouses, and transit hubs, with some demonstrations leading to temporary street closures and heightened police presence. Protest leaders said the actions were planned to be highly visible and sustained rather than symbolic.

Activist groups indicated additional demonstrations are planned in the coming days, signaling continued mobilization as immigration policy remains a focal point of national debate.

Russian drones struck Odesa, killing civilians and damaging buildings and infrastructure, as Ukraine pushed for faster progress on diplomacy. Repeated attacks on cities and the power grid are raising the cost of daily life even far from the front line.

Kyiv is also trying to shape the negotiation timeline while strengthening air defenses and expanding interceptor capacity. Winter conditions make infrastructure strikes more dangerous, since outages can quickly become a public health and shelter crisis.

Focus now shifts to whether talks move from broad signaling to enforceable steps on territory, security guarantees, and sanctions. Risks for Europe remain elevated as the war drags on, keeping defense spending high and sustaining pressure on energy and refugee systems.

The Federal Reserve kept interest rates unchanged, extending a pause after a late-2025 easing streak. Markets moved quickly as traders debated whether the next cut arrives in the spring or slips further into 2026.

Officials framed the decision as a wait-and-see stance, shaped by stubborn inflation and signs of cooling in the labor market. Fresh earnings results and an AI-driven rally heightened the market’s sensitivity, leaving stocks and the dollar reacting sharply to every new signal from policymakers.

For households and businesses, elevated borrowing costs remain most visible in mortgages, credit cards, and short-term loans. Holding steady offers breathing room, but if cuts are delayed, refinancing opportunities may stay limited for longer.

A major escalation arrived when the IRGC designation put one of Iran’s core power centers in the same legal bucket as internationally recognized terrorist groups. New sanctions tied to repression and surveillance widen the pressure beyond diplomacy into finance and travel.

Tehran’s response suggested fallout could extend to energy markets and regional security, with the EU move landing amid plans for naval drills and broader tensions. Households and investors could feel the impact quickly if shipping risk rises in key waterways.

Europe’s unanimous step also narrows the space for compromise, raising the cost of de-escalation on both sides via the terror listing. Policy makers now face a tighter set of options because rolling back legal designations is harder than lifting a single sanction.

U.S.-brokered peace talks between Ukrainian and Russian officials are expected to continue in Abu Dhabi, as negotiators move beyond initial exchanges toward more complex questions of sequencing and longer-term guarantees. The next phase of discussions will test whether both sides can translate early confidence-building measures into broader commitments.

Officials are expected to focus on the order and conditions for any follow-on steps, including security arrangements intended to endure beyond preliminary agreements. Progress, or the absence of it, could quickly influence battlefield planning and shape coordination among Ukraine’s allies on sanctions and military support.

Investors and policymakers are bracing for a key round of U.S. labor-market data, led by January’s nonfarm payrolls report and the Job Openings and Labor Turnover Survey (JOLTS). The releases will be closely watched for evidence that hiring is slowing or remaining more resilient than expected.

The figures are likely to shape expectations for the Federal Reserve’s next policy move as officials balance inflation concerns against signs of cooling growth. Any surprise in job gains, wage growth, or job openings could quickly shift interest-rate forecasts and move markets across equities, bonds, and the dollar.

The 2026 Winter Olympics are getting underway in Milan and Cortina d’Ampezzo, with global leaders, athletes, and dignitaries arriving for the opening ceremony and the start of competition. The event is expected to serve as both a sporting showcase and a high-profile diplomatic stage, drawing international attention throughout the Games.

But the buildup has already been marked by protests in host cities over U.S. security deployments, injecting political tension into the opening week. Organizers will be watching closely to see whether demonstrations expand or disrupt events, potentially shaping diplomatic optics and local engagement as the Olympics unfold.

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This week underscores how unresolved tensions are driving decisions across politics, diplomacy, and the economy.

In Washington, the rising shutdown risk shows how procedural brinkmanship can create real disruptions even when compromise is still possible.

Abroad, Ukraine talks continue under the shadow of ongoing strikes, keeping pressure on Europe’s security, energy, and defense planning.

Europe’s move against Iran’s Revolutionary Guard reflects a broader hardening of policy choices that narrows room for de-escalation.

Meanwhile, the Federal Reserve’s rate pause highlights how uncertainty itself is shaping markets and household decisions.

Together, the stories point to a period where delay and indecision carry growing costs.

February’s first full “Snow Moon” rises near the start of the week, a celestial moment that’s capturing attention among skywatchers and stargazers.

Dog lovers can follow the 150th Annual Westminster Kennel Club Dog Show, where top breeds compete through Feb. 3 in New York City.

In Connecticut, Chuckles XI will deliver his Groundhog Day forecast at the Lutz Children’s Museum, adding a local twist to midwinter folklore.

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—The Five Minute Daily Team