Some Takeaways of Israeli-Palestinian Conflict

Palestine’s Hamas launched an unprecedented attack on Israel over the weekend, resulting in the deaths of more than 700 Israelis. At the same time, Israel declared a state of legitimate war for the first time in its government's name since 1973. Additionally, dozens of hostages, including Americans, were taken back to Gaza.

For both parties in the conflict

• Israel's military prowess in the Middle East is not "unbeatable." $iShares MSCI Israel ETF(EIS)$

• Israel's significant intelligence failures left it unprepared for Hamas's hybrid warfare tactics, including lightning-fast small team raids and basic drone attacks.

• Internal political divisions in Israel may have contributed to the success of this attack.

• The United States, as an ally, may have been more focused on Ukraine and may not have detected Hamas's military buildup.

For United States

• There is a dilemma in allocating limited military aid resources (Ukraine, Israel). Should limited military aid be provided to Ukraine as planned, or should these resources be redirected to Israel? $Raytheon Technologies Corporation(RTX)$ $Lockheed Martin(LMT)$ $Northrop Grumman(NOC)$

• Politically, the response is likely to come from the predominantly Jewish elite, possibly leading to a gradual distancing of US relations with Arab countries.

• Economically, aside from potentially generating more military aid, this could strain already massive government spending, exacerbate the crisis of increasing US debt, and possibly further worsen inflation. $iShares 20+ Year Treasury Bond ETF(TLT)$

For other countries in the Middle East

• Saudi Arabia may pause its peace negotiations with Israel. After Israel's strikes on civilian targets in Gaza, Saudi Arabia faced immense pressure from the international Muslim community to suspend peace talks with Israel.

• Large-scale projects in the Middle East (related to Israel) may also be put on hold for a while. For example, the "India-Middle East" construction may be unable to proceed due to protests against Israel's involvement in the latest conflict.

• Another variable is Hezbollah's decision to launch a large-scale hostile operation in Lebanon, which could make the situation even worse. In such a scenario, even Syria could be drawn into the war, posing a survival threat to all parties involved.

For Russia

• Russia, which once supported the Israel Defense Forces in the Palestinian-Israeli conflict, now supports Palestinian statehood, potentially intensifying the global camp divide. Of course, other countries are more likely to approach the Palestinian-Israeli conflict with a balanced attitude.

• Furthermore, if the latest conflict becomes prolonged or even escalates into a regional conflict, the United States may freeze the Ukraine conflict to redirect limited military aid to Israel.

• The legitimacy of the objectives of both sides in the conflict will generate a broader international debate.

Hamas's killing of settlers, civilians who received training from the Israel Defense Forces, and the kidnapping of children, women, and the elderly in exchange for prisoners are considered legitimate means of pursuing national liberation by some Palestinian supporters, while groups led by the United States classify them as terrorism.

The Israeli control over the region has always been highly controversial.

The conflict may end in the short term due to Hamas's inability to resist, but resolving the dispute will not happen overnight, and the potential consequences may be ongoing. $S&P 500(.SPX)$