Asian equities climbed on Monday while the U.S. dollar softened and investors sought haven assets after a bombshell development in Washington that has shaken global financial markets: the U.S. Department of Justice (DOJ) has subpoenaed the Federal Reserve, threatening a criminal indictment of Fed Chair Jerome Powell. The rare move — confirmed by Powell himself — intensified fears over U.S. central bank independence and reverberated through markets from Tokyo to Singapore.
In a video statement Sunday evening, Powell disclosed that the Fed received grand jury subpoenas last Friday from the DOJ related to his June congressional testimony about a multiyear renovation project for Federal Reserve office buildings, a project that has drawn criticism for its size and cost. Powell portrayed the action as politically motivated pressure from the White House rather than a routine legal inquiry, saying it threatened the core principle that the central bank sets interest rates based on economic data, not political preference.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said, adding that the subpoenas appeared to be pretexts aimed at influencing monetary policy.
Powell has been engaged in a protracted dispute with President Donald Trump, who has publicly criticized the Fed for not delivering deeper and more rapid interest rate cuts. Last week’s soft U.S. employment report, which showed only 50,000 new jobs added in December and a slight fall in the unemployment rate, had already tempered expectations for imminent rate hikes and supported bets on a dovish stance from the Fed.
Despite Powell’s insistence that the central bank will maintain a data-dependent approach, markets reacted swiftly. The U.S. dollar weakened, with Bloomberg’s dollar index down about 0.2% against major currencies. At the same time, gold prices surged — bullion reached fresh highs as investors poured into safe haven assets amid the policy uncertainty.
In early Asian trading on Monday, major indices showed broad strength. Hong Kong’s Hang Seng, Shanghai Composite, Seoul’s Kospi and Taipei’s Taiex all posted gains, following Wall Street’s record closes last week. Other regional markets — including Bangkok, Manila, Singapore, Kuala Lumpur, and Jakarta — also traded higher as risk appetite remained resilient despite the unsettling headlines out of Washington.
The upbeat tone in Asian markets reflects a wider global optimism that had been in place at the start of 2026. Last week, key indices in Frankfurt, London, Paris and Seoul reached new highs, buoyed by optimism in the technology sector and strong performance in defense stocks. Investors had been buoyed by strong corporate earnings and a view that central banks would maintain supportive monetary conditions.
Still, analysts caution that the Powell subpoena message casts a long shadow over what had been a smooth start to the year. Markets typically react negatively to heightened political risk, particularly when it involves the independence of a major central bank. The apparent escalation of the Trump–Powell feud touches on a rare fault line in the U.S. economic framework, where monetary policy is supposed to be insulated from political pressure.
Alongside the legal drama in the United States, geopolitical tensions in the Middle East added to market nerves. Protests in Iran, which have drawn global attention, continue to stoke fears of broader regional instability. Over the weekend, President Trump said he was considering potential military options against Tehran following reports of a violent crackdown that left hundreds dead, remarks that further bolstered demand for havens including gold.
Oil prices, meanwhile, showed only modest declines after last week’s rally, which was supported by concerns over supply risks from both Iran protests and renewed tension around Venezuelan crude holdings. Trump’s warning to Tehran against harming demonstrators injected a fresh layer of uncertainty into energy markets, with traders balancing the threat of supply disruption against broader economic drivers.
The dollar’s retreat and a jump in gold — which in some contracts surpassed $4,600 per ounce — highlighted how market dynamics are shifting in response to the dual pressures of political uncertainty and monetary policy friction. Silver and other precious metals also climbed, reflecting a broader flight to safety among global investors.
Within the United States, the Powell subpoena has ignited political debate over the separation between the federal government’s executive branch and the central bank. Critics of the move argue that weaponizing legal processes to influence monetary policy sets a dangerous precedent, potentially undermining the credibility and independence of the Fed at a critical juncture for both domestic and global markets.
Senators from both sides of the aisle have weighed in, with some warning of broader implications for U.S. financial stability if central bank independence is eroded. The Fed, for its part, has reiterated that it will continue to base decisions on inflation, employment and other core economic metrics.
As markets continue to absorb these developments, investors are likely to watch closely for signals from central banks, economic data releases, and political leaders in coming days. The intersecting pressures of monetary policy debates, legal scrutiny of the Federal Reserve, and geopolitical unrest illustrate how interconnected — and fragile — global financial markets can be in times of heightened uncertainty.
