/cloudfront-us-east-2.images.arcpublishing.com/reuters/7VBO6LD6ZBMMNPIEWVHSUGOLSE.jpg "Investors Alert: Heightened Conflict in Middle East Sends Market into Uncertainty")
Investors on High Alert as Middle East Conflict Intensifies
New York – As investors eagerly await the upcoming Federal Reserve meeting and key U.S. data, they are also keeping a close eye on the escalating conflict in the Middle East and its potential impact on market volatility.
Over the weekend, Israeli Prime Minister Benjamin Netanyahu announced that the second phase of the Gaza war had commenced, with Israeli forces engaging in ground operations against Hamas militants. This development, coupled with the U.S. dispatching additional military assets to the region and Israel’s attacks on Gaza and Hamas supporters in Lebanon and Syria, has raised concerns among investors about the possibility of a wider conflict.
“The situation in Israel is causing a lot of anxiety,” commented Randy Frederick, managing director of trading and derivatives for Charles Schwab.
The possibility of disruption in crude supplies due to the conflict has already impacted the oil market, with Brent futures settling up 2.9% at $90.48 a barrel on Friday. Additionally, spot gold has surpassed the $2,000 mark for the first time since mid-May, as nervous investors seek safe-haven assets.
Analysts at Capital Economics noted that the oil market response to the conflict has been relatively muted thus far. However, they emphasized that any indication of increased involvement from other regional countries would result in a significant rise in oil prices.
If the conflict escalates and the U.S. increases war-related spending, it could lead to a further rise in Treasury yields, which are already at 16-year highs. Peter Cardillo, chief market economist at Spartan Capital Securities, pointed out that this could impact the deficit. Conversely, a widening conflict could create demand for safe-haven assets such as Treasuries, potentially easing pressure on stocks and other investments.
UBS Global Wealth Management highlighted the fact that U.S. government bonds have not yet fulfilled their typical safe-haven role. However, they anticipate that an escalation of the conflict would shift attention away from monetary policy concerns and increase demand for Treasuries as a safe-haven asset.
Gold and oil have historically been used as hedges against volatility, and they may serve as safe-haven assets during this uncertain period.
The conflict has also had an impact on market volatility, with the Cboe Volatility Index climbing and nearing seven-month highs.
Amidst all this uncertainty, the Federal Reserve is set to release its latest monetary policy statement on Wednesday. Additionally, Apple’s quarterly results, along with a busy week of corporate reports, will draw further attention from investors.
Reporting by Lewis Krauskopf; Additional reporting by David Randall; Editing by Ira Iosebashvili, David Gregorio and Diane Craft
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