Share prices were mixed on Monday following the Israeli government’s declaration of war on Hamas in response to deadly attacks from the Gaza Strip. U.S. futures were lower, while oil prices surged by more than $3 a barrel. When conflicts arise in the Middle East, there is often the fear of disruptions to oil supplies, leading to higher oil prices. Stephen Innes of SPI Asset Management commented that these disruptions or escalations in the region can have significant implications for energy markets, global supply chains, and geopolitical dynamics.
Although there has been no immediate impact on oil output due to the fighting, geopolitical escalations in the Middle East tend to result in a “buy-first-ask-questions-later” response from investors. Oil prices had previously experienced a slight decrease but rebounded recently. Early on Monday, U.S. benchmark crude oil was trading at $86.05 per barrel, up $3.28, while Brent crude, the pricing basis for international trading, rose by $3.11 to $87.69 per barrel.
Several markets in Asia were closed for holidays, but Shanghai reopened after a weeklong holiday, falling about 0.7%. Meanwhile, the S&P/ASX 200 in Australia was up 0.3%, and India’s Sensex slipped 0.4%. The SET in Bangkok was down 0.7%. Hong Kong’s market was closed in the morning due to typhoon warnings but was set to reopen in the afternoon.
The two-day toll from the fighting in the Middle East has surpassed 1,100 deaths and thousands of injuries on both sides. The Israeli declaration of war raises concerns about the possibility of a ground assault into Gaza, which has historically resulted in heavy casualties. In response, U.S. Defense Secretary Lloyd Austin ordered the Ford carrier strike group to sail to the Eastern Mediterranean to assist Israel, in an effort to deter the conflict from spreading further regionally.
In other news, Wall Street rallied on Friday after investors analyzed a strong report on U.S. employment, which initially caused stocks to tumble due to fears of high inflation and the Federal Reserve keeping interest rates high. The S&P 500 rose 1.2%, the Dow increased by 0.9%, and the Nasdaq composite gained 1.6%. Treasury yields also rose after the report’s release, with the yield on the 10-year Treasury reaching its highest level since 2007. This may raise concerns of a recession in the future.
Despite the potential for high inflation, there are some encouraging signals for the Federal Reserve. Workers’ average wages rose at a slower pace than expected in September, which could reduce the pressure on companies to raise prices for their products. Reports on inflation at both the consumer and wholesale levels this week will be crucial data points before the Fed’s next announcement on interest rates on November 1.
Additionally, a strong job market can benefit financial markets in the short term, as it indicates the economy is still performing well despite high interest rates. This, in turn, could support corporate profits. In currency trading, the dollar rose slightly against the Japanese yen but remained unchanged against the euro.
– Hamas: A Palestinian political and military organization that governs the Gaza Strip.
– Geopolitical dynamics: The interactions and relationships between various states and regions on a global scale.
– Benchmark crude oil: A standard oil price used to determine the value of other grades of crude oil.
– Brent crude: A particular grade of crude oil used as a pricing reference in international trading.
– Federal Reserve: The central banking system of the United States.
– Treasury yields: The interest rates earned on U.S. government securities.
– Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power.
Sources: Not Provided