Oil Prices Surge Amid Israel-Hamas Conflict
Oil prices experienced a significant surge at the beginning of the week, while stock markets and the Israeli currency faced declines as investors responded to the outbreak of war between Hamas and Israel.
While Israel is not a major oil producer, the intensifying tensions in the oil-rich Middle East unnerved investors who had been selling off oil in recent weeks.
Factors such as inflation, concerns of a global economic downturn, and a correction in oil prices that had been surging in recent months contributed to the decline in US oil prices from approximately $95 a few weeks ago to just above $80 last week. However, on Monday morning, US oil prices rebounded, trading more than 3% higher above $85 a barrel. Brent crude, the global benchmark, also saw an almost 3% increase, trading at nearly $87 a barrel.
The conflict escalated after Israel formally declared war on Hamas following the Islamist militant group’s deadly surprise assault on Saturday, resulting in more than 700 casualties in Israel and over 400 Palestinians.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, expressed concerns about the situation, stating, “With the Israeli government warning of a long and difficult war, there are concerns that deep and incessant retaliative strikes on Gaza could potentially bring Iran into the conflict and have an impact on the flow of energy in the region.”
The Israeli shekel experienced a significant drop, reaching 3.91 to the US dollar on Monday, its lowest level since 2016. In response, Israel’s central bank announced plans to sell up to $30 billion worth of foreign currencies to stabilize the currency. An additional $15 billion of support would be provided if necessary.
In the equity markets, US stock futures initially fell but later rebounded after Israel announced a cessation of fighting within its borders and regaining control of communities around the Gaza Strip. European stocks also faced initial declines but eventually stabilized. Asian markets displayed mixed reactions.
The central question for markets remains whether the conflict will remain contained or expand to involve other regions, particularly Saudi Arabia. ANZ analysts noted that initial market sentiment assumes a limited scope and duration of the conflict, but higher volatility can be expected.
The Israel-Hamas conflict has injected uncertainty into global financial markets, with investors closely monitoring developments in the region and their potential impact on oil prices and the broader economy.
See also: Powerball Jackpot Surges to $1.4 Billion
