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The intensifying Israel-Hamas conflict has reverberated through the world’s financial markets, causing fluctuations in stocks, cryptocurrencies, and commodities.
Global markets suffered a blow as tensions between Israel and Hamas erupted into a full-scale conflict over the weekend. This geopolitical turmoil has sent shockwaves across different asset classes, pushing emerging stocks and cryptocurrencies into a downward spiral, while propelling the value of oil and precious metals.
These developments come against the backdrop of existing concerns regarding the Ukraine-Russia conflict, surging inflation rates, and rising interest rates.
Global Equities Suffer Amid Israel-Hamas Warfare
Prominent U.S. stock indices, including the S&P 500, Dow Jones, Nasdaq, and Wilshire 5000, witnessed declines today. Despite closing on a positive note last Friday, the situation took a downturn in the wake of the Israel-Hamas conflict.
In response to the crisis, the Bank of Israel announced its intention to sell up to $30 billion in foreign currency to stabilize the markets. Additionally, Israeli government bonds experienced a decline, with the 2120 Hundred Year bond dropping by 5.3 cents on the dollar, reaching a historic low.
Commodities Surge: Oil and Metals Gain Momentum
Historically, oil and precious metals have served as safe havens during times of geopolitical unrest, and this pattern holds true in the current Israel-Hamas conflict. Both U.S. crude oil and Brent crude observed significant price increases, which carry broader implications.
The Organization of the Petroleum Exporting Countries (OPEC) recently raised its output projections to 116 million barrels per day by 2045, marking a 6 million BPD increase from the previous year. In light of the escalating Israel-Hamas conflict, there are discussions about further reducing oil output.
Susannah Streeter, Hargreaves Lansdown’s head of money and markets, remarked, “The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East if other countries become involved.”
If other nations get entangled in the Israel-Hamas war, it could disrupt global oil supply chains, leading to higher prices and exacerbating existing concerns about inflation in global economies.
Cryptocurrency Market Cap Contracts Amid Global Turmoil
While cryptocurrencies have been dubbed “digital gold,” their performance during the Israel-Hamas conflict has challenged that notion. The total market capitalization of cryptocurrencies decreased by 2.04% against the U.S. dollar. Major cryptocurrencies like Bitcoin and Ethereum followed suit, declining by 1.7% and 2.46%, respectively, against the U.S. dollar during early trading hours.
Geopolitical strategist Tina Fordham told Reuters, “Typically, the most sensitive asset classes to geopolitical risk are emerging markets, commodities, and currencies – and, true to form, we’ve seen hits in all of those areas.”
Currencies were also impacted, with Israel’s national currency, the shekel, weakening sharply against the U.S. dollar, which rose by 2.96% to 3.952 shekels. Gold, often considered a safe haven, saw demand rise by around 1.39% to $1,858 an ounce. Silver experienced a modest increase of 1.23% at 3:00 p.m. (ET).
The Israel-Hamas conflict has underscored the sensitivity of global financial markets to geopolitical events. While the immediate financial ramifications are evident across asset classes, the long-term repercussions remain uncertain.