The Israeli-Hamas conflict has raised concerns about geopolitical risks for financial markets, with investors closely watching whether it could escalate further, potentially impacting oil prices and the global economy.
Israeli Prime Minister Benjamin Netanyahu vowed to take action against Hamas, leading to concerns of a wider Middle East conflict. Oil prices surged nearly 6% on Friday, reflecting fears of a larger-scale conflict in the region.
Market reactions have been relatively muted so far, with the S&P 500 falling 0.5% and safe-haven assets like gold seeing increased demand.
The possibility of a more significant conflict could lead to higher inflation and interest rates worldwide, except for the United States, which could serve as a safe haven for foreign investors.
Oil markets face one of the most substantial geopolitical risks since Russia’s invasion of Ukraine last year. Events like Chevron halting natural gas exports from a pipeline between Israel and Egypt demonstrate the potential impact on energy markets.
While rising oil prices are unlikely to have a significant effect on U.S. gas prices or consumer spending, the situation merits close monitoring due to its potential impact on economies and markets.
Investors are considering assets such as oil, shares of oil companies, commodities, and gold as potential hedges against geopolitical risks.