How Israel-Hamas Conflict Affects The Market😨
November crude futures up 4% on war concerns. S&P futures dip 0.73% while US treasury yields climbed back to 4.8% as the Israel-Hamas conflict extended into its third day following a surprise attack on Israel by Palestinian militants Hamas.
⚠️ Trading tip: looking at SPY puts below 425.94 and calls above 428.35 on Monday. Beware of another bear trap this week.
Expect some weakness before a rebound
US President Joe Biden and Israel Prime Minister Benjamin Netanyahu spoke about the situation in Israel on Saturday. In a statement, Biden condemned the attacks by Hamas and said the United States stands by Israel.
"I made clear to Prime Minister Netanyahu that we stand ready to offer all appropriate means of support to the Government and people of Israel. Terrorism is never justified. Israel has a right to defend itself and its people. The United States warns against any other party hostile to Israel seeking advantage in this situation. And my Administration’s support for Israel’s security is rock solid and unwavering," he said in the statement.
Biden added that he and his team are monitoring the situation and will stay in touch with Netanyahu. Earlier, Netanyahu's office released a statement saying Biden called the prime minister Saturday and voiced his support for Israel.
“The Prime Minister thanked the US President for his unreserved support and made it clear that a prolonged and powerful campaign would be required in which Israel would win,” the statement added.
Economic news this week
The combined death toll from the Hamas attack on southern Israel has climbed to more than 1,100 as fighting heads into a third day. The US said it’s moving a six-vessel aircraft carrier strike group to the eastern Mediterranean and is augmenting its fighter aircraft squadrons in the region. Iranian security officials helped Hamas plan the attack in a series of meetings over months, the Wall Street Journal reported.
The swift and surprising outbreak of Middle East violence with the attack by Hamas within Israel has already seen the US dollar rebound early on Monday in Asia against everything except the yen and the franc. That underscores the likelihood that the conflict will spur an extension of the recent souring in sentiment across markets.
Some reversal play in store
The US dollar’s role as the prime, post-pandemic haven was already coming to the fore as soaring bond yields put pressure on economies and therefore earnings outlook. The read for Treasuries will be a bit harder to parse initially, with a Japan holiday limiting liquidity and confining traders to futures.
The worst-case scenario for equities would be if oil spikes and Treasuries therefore falter in the face of more potential inflationary pressure. But even the better case, where those two dynamics don’t play out, is likely to keep the dollar strong and equities facing some strong headwinds for the short term at the very least.
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I think it can also lead to sector rotation, as investors move out of sectors that are perceived to be more risky and into sectors that are perceived to be less risky.
The conflict can lead to increased volatility in the market, as investors react to the news and uncertainty.
Oh no I guess the oil and the other commodities prices will be heavily affected.
The Israel-Hamas conflict can have a significant impact on the market.
Definitely not a good thing. Hope the world peace…