Pakistan retaliates with strikes on suspected militant bases in Iran

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Good morning. Pakistan carried out a pre-dawn attack on suspected militant bases in Iran yesterday, a retaliatory strike that threatened to escalate tensions after Iran attacked a jihadi group in Pakistan this week.

Pakistan’s foreign ministry said it “undertook a series of highly co-ordinated and specifically targeted precision military strikes against terrorist hide-outs” in Iran’s Sistan-Baluchestan province yesterday morning, killing several militants.

Sistan-Baluchestan has long been a base for separatist groups fighting an insurgency against the Pakistani state.

Iran confirmed that Pakistan had launched several missiles on an Iranian border village at 4.30am local time. Interior minister Ahmad Vahidi said nine foreign nationals, among them three women and four children, had been killed in the targeted village.

Thursday’s strike follows an attack by Iran on a Pakistan-based jihadi group on Tuesday. The military escalation between the two countries has prompted alarm that rising tensions across the region could threaten a broader conflict, after war broke out between Israel and Hamas in October.

Here’s how analysts assessed the risk of further escalation — and why the prospect of unrest on the Pakistan-Iran border is particularly concerning for China.

• Israel-Hamas war: Arab states are working on an initiative to secure a ceasefire and the release of hostages in Gaza as part of a broader plan that could offer Israel a normalisation of relations if it agrees to “irreversible” steps towards the creation of a Palestinian state.

And here’s what else I’m watching today and over the weekend:

• Economic data: Japan reports inflation figures for December today.

• Singapore Art Week: The island-wide art fair begins today and runs until January 28. Don’t miss this profile of Taiwanese artist Su Hui-Yu, whose work on collective memories, transgression and technological change in Asian societies will be shown in Singapore.

• Moon landing: Japan hopes to become the world’s fifth country to land on the moon when its Smart Lander for Investigating Moon spacecraft attempts a lunar landing early Saturday (Japan Standard Time).

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. China has staged its largest military manoeuvres around Taiwan in three weeks, in its first active response to the election of Lai Ching-te as the country’s president last weekend. The People’s Liberation Army conducted joint air and naval combat patrols near Taiwan on Wednesday night, with 24 PLA aircraft and five PLA Navy vessels operating in the area, Taiwan’s defence ministry said.

• Related: Several prominent US lawmakers will travel to Taipei in the coming weeks in a show of support for Lai Ching-te, who will be inaugurated as Taiwan’s new president in May.

2. BYD is to invest $1.3bn in an electric vehicle factory in Indonesia, after the Chinese carmaker unveiled three new battery models for sale with the aim of becoming Indonesia’s biggest EV brand. The site would be the sixth auto plant outside China planned by the Warren Buffett-backed group. Here’s more on BYD’s aggressive expansion overseas.

3. Singapore’s transport minister has been charged with corruption and has resigned, in a rare graft accusation in the city-state that prides itself on its reputation for clean governance and transparency. S Iswaran faces 27 charges including graft, obstruction of justice and obtaining “valuable things” from a prominent real estate tycoon, the country’s corruption watchdog said yesterday.

4. Poland’s highest court yesterday ruled that Prime Minister Donald Tusk’s overhaul of state media was unconstitutional. It was the latest ruling by the court — which is dominated by judges appointed by the rightwing Law and Justice party while it was in office — against the pro-EU leader’s reform drive since he took power in December. Tusk’s culture ministry responded to yesterday’s ruling saying it had “no legal significance” because of the court’s politicisation. Read the full story.

5. Bobby Jain’s new hedge fund is falling short of its original $8bn-$10bn fundraising target, thwarting his ambition for the industry’s largest-ever debut. The Credit Suisse veteran and former co-chief investment officer of Millennium Management has told potential clients he is now aiming to launch Jain Global in July with $5bn-$6bn of assets, according to investors. Here’s why he’s had to scale back his goal.

News in-depth

There’s a coffee battle brewing in India as investors seek to tap the country’s growing food-and-beverage market. Starbucks, which operates a joint venture in India with the country’s Tata conglomerate, announced last week that it planned to nearly triple the number of outlets in India to 1,000 by 2028. But the Seattle-based coffee chain faces competition including Pret A Manger, which launched in India last year in partnership with Mukesh Ambani’s Reliance Industries.

We’re also reading . . . 

• Japan’s bubble-beating ambitions: The Nikkei has been within reach of its all-time high but factors outside the country could prove critical, writes Leo Lewis.

• Pakistan’s refugee crackdown: Islamabad’s crackdown on foreign nationals has disproportionately affected the well-established Afghan population, writes Zehra Munir.

• FT Magazine: Bruno Crastes was one of the most gifted fund managers of his generation. Why did he bet so much on a notorious financial escapologist? Here’s the story on the most mysterious and destructive friendship in high finance.

Chart of the day

The year of the dragon has historically augured a spike in births in China and other countries in east Asia as potential parents try to time the births of their offspring with an auspicious zodiac sign. But experts said this demographic idiosyncrasy was unlikely to come to Beijing’s aid in this dragon year, which begins next month.

Take a break from the news

Generative artificial intelligence could transform our understanding of the animal kingdom. The FT’s audiovisual team explores how the same technology that is powering ChatGPT could eventually allow us to understand — or even speak — animal languages.

Additional contributions from Tee Zhuo and Gordon Smith

This edition corrects the name of the fund manager in the FT Magazine story, which was misidentified in an earlier version.