IMPORTANT POINTS:
- Alamariu anticipates an adverse global investment climate due to the Israel-Hamas conflict.
- Violence in the Middle East drives oil prices, with the potential to rise.
- Israeli military strategy intensifies and prolongs market volatility.
The intensified confrontation between Israel and Hamas triggers not only geopolitical alarms but also considerable turbulence in global financial markets.
Dan Alamariu, chief geopolitical strategist at Alpine Macro, forecasts a notoriously hostile environment for global investments in the next 1-3 months and compares it to the situation during the Russian invasion of Ukraine in 2022, stating that: “The direction of the conflict is uncertain, but it is highly likely that it will intensify.”
Financial Consequences: Lessons from the Recent Past
Russia’s military incursion into Ukraine last year caused marked instability in US markets. The S&P 500 index experienced declines in 11 of the 17 weeks between February and May, coinciding with the Federal Reserve’s fastest tightening of monetary policy in 40 years and the concomitant collapse of Silicon Valley Bank and First Republic Bank.
Oil Volatility: A Commodity in the Crosshairs
Oil prices, particularly West Texas Intermediate (WTI) crude, saw a 3.7% jump, surpassing $85 per barrel on Monday, in the wake of violence in the Middle East. According to Alpine Macro, an escalation of the conflict could maintain volatility in the energy market. Alamariu warns: “In the short term, prices should increase in the coming days and weeks,” and maintains that this trend could last if the conflict expands.
In a more extreme scenario, with Israel attacking Iran’s nuclear facilities, oil prices could catapult above $150 per barrel, according to the firm’s projections.
Military Strategies and Responses: The Siege of Gaza
In an attempt to retaliate for Hamas attacks, Israeli Defense Minister Yoav Gallant has implemented drastic measures, mobilizing 300,000 reservists and ordering a “complete siege” of the Gaza Strip, suspending all supplies of electricity, food and fuel from Israel to the enclave. Alamariu projects: “Although Israel’s retaliation strategy is yet to be defined, a robust response is expected, lasting weeks, if not months, thus generating elevated geopolitical and market volatility.”
Finally, with US markets already navigating a sea of uncertainties, exacerbated by persistent inflation and rising interest rates, the fallout from the conflict between Israel and Hamas could further fuel risk aversion among investors. investors, reorienting investment strategies in the global environment in the coming months.
