FirstFT: Middle East at its most ‘dangerous’ in 50 years, Blinken warns

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US secretary of state Antony Blinken has warned that the Middle East faces its most “dangerous” conditions since at least 1973, as Washington considers its response to an attack that killed three service members at the weekend.

Blinken’s comments underscored the concern in the Biden administration about the potential for an expansion of the conflict, even as it vows to retaliate against the Iran-backed militias it has blamed for the deadly strike.

The US military had failed to stop the enemy drone on Sunday after mistaking it for an American drone that approached a base near Jordan’s border with Syria at the same time, a US official said yesterday.

The attack was the first to kill US troops since the Israel-Hamas war began on October 7 and triggered a wave of assaults by Iranian-aligned groups against American forces in the region.

This has raised pressure on President Joe Biden to find a way to halt the attacks on US personnel and interests. Here’s more on what Blinken has called an “incredibly volatile” situation.

• Go deeper: The Middle Eastern borderlands where Sunday’s drone attack took place have long been a “tinderbox”, our correspondent Raya Jalabi reports.

• ‘Axis of Resistance’: Attacks by a network of Iran-backed militant groups risk dragging the US deeper into regional hostilities.

• Red Sea attacks: Companies trading commodities such as iron ore and grain are threatening legal action to pressure shipowners to use the more dangerous but faster Suez Canal route.

Here’s what else I’m keeping tabs on today:

• Economic data: The EU releases its flash fourth-quarter gross domestic product estimate, while the UK has insolvency figures for the same period. France reports monthly consumer spending data and the IMF publishes its World Economic Outlook.

• France: President Emmanuel Macron begins a two-day state visit to Sweden, while his new prime minister, Gabriel Attal, is set to outline the government’s goals in a speech at the National Assembly in Paris.

• Results: Alphabet, Canon, Diageo, Microsoft, Pfizer and Starbucks report. See our Week Ahead newsletter for the full list.

• US-China: Officials hold talks in Beijing aimed at stemming the flow of chemicals from China used to make the deadly opioid fentanyl.

Five more top stories

1. The Big Four firms have admitted to breaking hundreds of rules that safeguard the independence of their audit work. The admissions come as the US Public Company Accounting Oversight Board urges companies and investors to pay greater attention to the findings of its annual inspections of audit firms, the latest round of which are expected to be released in the coming weeks. Here’s more on the violations.

2. Exclusive: Binance has begun to allow some larger traders to keep their assets at independent banks, according to people with knowledge of the arrangements, bowing to pressure from customers. Previously, clients of the exchange could only hold their assets either on the exchange or through custodian Ceffu, which US regulators have called a “mysterious Binance-related entity”. Nikou Asgari has more details from London.

3. EU member countries have agreed to set aside billions of euros of profits from frozen Russian central bank assets in a first step towards their possible use for Ukraine’s reconstruction. The unanimous decision yesterday, which has yet to be formalised, is part of the bloc’s show of support for Kyiv ahead of the second anniversary of Russia’s full-scale invasion. Here’s what will happen to the money.

• Russian oil: Despite EU sanctions, disguised Russian fuels are being shipped to European buyers and allegedly even the US military through an unlikely staging post on Turkey’s southern coast.

• War in Ukraine: The lack of skilled defence workers who can make ammunition could hit Kyiv’s battlefield fortunes, writes Elisabeth Braw, adviser to Gallos Technologies.

4. Gambling group Flutter plans to quit the UK’s FTSE 100 index by moving its primary listing to New York, a transition that could happen as soon as this year if approved by shareholders. The Ireland-based group, which owns Paddy Power, said the move would offer “access to much deeper capital markets” and new investors. Here’s more on the latest blow to London’s ailing stock market.

• More listings: French carmaker Renault has cancelled plans to list shares in its new electric vehicle and software business, Ampere. Here’s why.

5. Northern Ireland’s biggest pro-UK party has agreed a deal to restore the power-sharing executive after nearly two years of political paralysis, its leader said. Speaking to reporters early today after more than five hours of talks with party members, Sir Jeffrey Donaldson said the Democratic Unionists would return to Stormont provided the UK government passed legislation to address its concerns. Read the full story.

For the inside track on British politics, sign up for our Inside Politics newsletter by Stephen Bush.

News in-depth

The price of constructing a basic flat road in the UK is £8.45mn per km, more than double the cost in France, according to BCG. The significantly higher construction costs underline the tricky situation for politicians already grappling with the transition to a low-carbon economy and mounting public debt. The pressure to upgrade the country’s tattered roads, railways and bridges piles on, but will Britain be able to afford its infrastructure bill?

We’re also reading . . . 

Chart of the day

UK shop price inflation eased sharply in January to its lowest rate in almost two years as retailers heavily discounted goods during a weak sales period, according to industry data. Markets have been pricing in that the Bank of England will hold interest rates on Thursday and start cutting rates in June.

Take a break from the news

“Death by meeting,” “the tower of no”, “blowhard bosses” — a new book by Stanford professors Bob Sutton and Huggy Rao focuses on the unnecessary bureaucracy and outright jobsworthiness that plague many organisations.

Additional contributions from Benjamin Wilhelm and Gordon Smith