Risk tumbles on Palestine-Israel military conflict, safe havens bid

Dhwani Mehta FXStreet

The US S&P 500 futures, a risk barometer, are under intense selling pressure in early dealings on Monday, as Asian traders react to the news of a renewed military conflict in the Middle East between Palestine and Israel, which could risk spreading to other parts of the region.

On Saturday, the Palestinian militant group, Hamas, invaded Israel by launching an unprecedented attack from the Gaza Strip into nearby Israeli towns, killing residents and taking hostages.

In retaliation, Israeli conducted airstrikes in Gaza, flattening residential buildings in giant explosions, including a 14-story tower that held dozens of apartments as well as Hamas offices in central Gaza City.

In a televised address Saturday night, Israeli Prime Minister Benjamin Netanyahu said that Israel is at war. He said, “All the places that Hamas hides in, operates from, we will turn them into ruins. Get out of there now,” he told Gaza residents.

The strength, sophistication and timing of the Saturday morning attack shocked Israelis, several media outlets reported.

Investors weigh the risks of a full-blown Middle-East geopolitical conflict, which could trigger a fresh rally in Oil prices, leaving central banks and major economies battling with new inflationary trends. The renewed geopolitical tensions could affect the global economic outlook adversely.

"It’s too early to say" what the implications may be, though oil and equity markets may see immediate fallout, Agustin Carstens, general manager of the Bank for International Settlements (BIS), said in a presentation to the National Association for Business Economics.

In an early response to the Middle East conflict, the US S&P 500 futures are down 0.78% on the day, WTI prices are jumping over 4% to regain $85, Gold is up 1% and the US Dollar Index is rebounding firmly above 106.00.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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