Stocks have been rising recently, reversing the recent downtrend. This is despite the escalation in the Middle East that started this weekend, which should have increased investor uncertainty. The conflict has already resulted in the rise of inflation and interest rates all over the world. The most relevant factor here is the rise in prices for oil in the Middle East.
The major indices illustrate the changes quite handily. The Dow Jones climbed up by 0.6%, as did the S&P 500. Meanwhile, the Nasdaq rose 0.4%, which may have to do with its tech reliance.
The attacks on Israel by Hamas this Saturday resulted in an Israeli response. This has meant that Israel felt it necessary to declare war on Hamas, meaning another Middle East conflict. They are now preparing for a siege and possibly even an assault on Gaza. Such a conflict could rage for many months and could lead to further escalations with neighbouring states. It adds to further geopolitical tensions that started with the Russo-Ukrainian war.
Middle East Conflict: Market Uncertainty
While such events do not usually leave a long-term effect on markets, there are many things to consider. Such events could cause knock-on effects that may lead to even more disastrous effects geopolitically and, thus, economically. If the situation remains contained, investors might not worry. However, there is no telling what the long-term impacts could possibly be with yet another Middle Eastern war.
Another result was the quick rise in oil prices. Traders worry that those producing oil might feel the effects of the conflict and may even join it. This would evidently have an effect on the availability of oil in the Middle East and, therefore, in general. Futures for both WTI crude and Brent Crude rose by 4%. Safe-haven assets like gold and bonds rose in demand as they offered stability in this tumultuous time.
