Oil prices spike as supply concerns are stoked by Hamas-Israeli attacks

At a time when the conflict’s death toll had surpassed 1,000 due to Hamas’s massive surprise attack from Gaza, Israel, still reeling from the deadliest attack in fifty years, formally declared war on the Palestinian militant group.

After Hamas launched a surprise attack on Israel over the weekend, raising new concerns about tensions in the Middle East, oil prices rose while the dollar and yen strengthened on Monday.

Concerns about the region’s crude supplies were already high due to Saudi Arabia and Russia’s output cuts at the time of the crisis, which only heightened those concerns.

Energy costs are a major contributor to price increases, so it has also rekindled concerns about the impact on inflation, which is causing central banks new problems as they attempt to scale back interest rate increases to prevent recessions.

More than 1,000 people have died as a result of the unexpected attack and Israel’s subsequent declaration of war. This has sparked worries that the conflict could become more widespread and involve Iran and the United States.

According to Brian Martin and Daniel Hynes of the ANZ Group, “key for markets is whether the conflict remains contained or spreads to involve other regions, particularly Saudi Arabia.”.

“At least initially, it appears markets will assume the situation will remain contained in terms of its scope, duration, and effects on the price of oil. The volatility, however, is likely to increase. “

Prior to slowing down as the day went on, both main contracts saw a more than 5% increase in early Asian trading.

Stephen Innes of SPI Asset Management, however, issued the following caution: “Historical analysis suggests that oil prices tend to experience sustained gains after the Middle East crises.

“However, stocks typically bounce back and trend higher after a brief period of volatility. Gold and Treasurys, safe-haven assets that initially see gains during such crises, typically see their price spikes diminish as the situation stabilizes.

But given that Middle East analysts believe this to be a crucial time for Israel, the viewpoint appears explosive under the circumstances. “.

Investors moved into the safety of the dollar, which was up against the pound and euro as well as the Australian and New Zealand dollars, as a result of a decidedly risk-off mood.

The yen, one of the safest currencies, gained strength against the dollar but is still stuck near 11-month lows.

One percent was gained by gold, another important haven.

Equity markets were mixed, with Shanghai falling on its first day back after a weeklong holiday as investors remained concerned about the faltering Chinese economy.

Losses also occurred in Mumbai, Singapore, Manila, Bangkok, and Wellington; however, Hong Kong saw a gain in shorter trade after being closed due to a typhoon in the morning.

Gains were eked out in Sydney and Jakarta. Tokyo was closed due to a holiday.

Paris and Frankfurt saw declines, while London grew marginally.

The lackluster performance occurred in spite of a Wall Street rally as traders cheered data showing a faster-than-anticipated increase in new jobs but slower wage growth.

The “Goldilocks” figures, which are neither too strong nor too weak, increased confidence that the world’s largest economy can avoid a recession even though the Federal Reserve keeps interest rates high.

Although officials are determined to subdue inflation and keep it at their target of two percent, there are still concerns that the bank will raise rates one more time before the year is out.

AFP.