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Concerns over further escalation in the Middle East are keeping investors cautious, more than a week after Hamas’s attack on Israel. Global markets are bracing for more volatility, as Israel prepares for a likely ground offensive into Gaza, and hundreds of thousands of Gazans flee to the southern part of the Gaza Strip.
Fears that the Israel-Hamas war will develop into a regional conflict have pushed up energy prices over the last week. Brent crude oil is trading over $90 per barrel this morning, up from $85 per barrel on 6 October, the day before Hamas’s attack. Oil has climbed on concerns of supply disruptions, with Israel having temporarily closed its Tamar gasfield last week.
Chris Weston, head of research at Pepperstone, says: "Many energy experts see the risk of a supply event here as fairly low, but should developments escalate on various fronts, then the market will increase the possibility of a disruption."
The markets are sensitive to a few potential “pressure points”, reports Kyle Rodda, senior financial market analyst at Capital.com. He suggests three potential scenarios: a potential Israeli ground invasion; if Iran is seen to have meddled in the Hamas attack it raises the odds of more significant financial and trade sanctions or retaliation from Israel; and conflict on Israel’s northern border, with fears Hezbollah could escalate its conflict.
Europe
Stock markets have opened a little higher, with the pan-European Stoxx 600 index rising 0.3% at the open. The FTSE 100 index has gained 21 points, or 0.3%, to 7621.Susannah Streeter, head of money and markets at Hargreaves Lansdown, says investors are in a defensive mood.
Asia-Pacific
Most stock markets have fallen today, amid rising risk sentiment. Japan’s Nikkei has lost over 2%, while China’s CSI 300 index is down 1.1%, and South Korea’s Kospi 200 is 0.7% lower. Reports that the US is planning to tighten sweeping measures to restrict China’s access to advanced semiconductors and chipmaking gear are also hitting shares in Asia.
Traders are edgy, rather than panicking, about the situation in the Middle East, noting that US secretary of state, Antony Blinken, said yesterday that Arab states have a “determination” that the conflict does not spread. There are also reports that US and Israelis officials are discussing the possibility of a visit to Israel soon by US President Joe Biden.
Jim Reid, strategist at Deutsche Bank, says: "In the overnight session there has been some relief that a ground offensive hasn’t begun yet in Gaza and that diplomatic channels seems to be open for now."
John Velis, foreign exchange and macro strategist at investment bank BNY Mellon, predicts geopolitical tensions will push up the US dollar.
Also coming up today ...
European finance ministers will discuss the economic outlook when they meet for a Eurogroup meeting today. US Treasury secretary Janet Yellen is expected to attend too.
In London, Sam Woods, deputy governor of Prudential Regulation at the Bank of England, will speak at the City Banquet, at Mansion House.
The agenda
• 9am BST: Italian inflation report for September
• 9.30am BST: BoE's Huw Pill on ‘the current economic outlook
• Today: Eurozone finance ministers hold a Eurogroup meeting
• 9.10pm BST: Sam Woods, PRA boss speaks at Mansion House
We’ll be tracking all the main events throughout the day ... |
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