Oil prices jumped and stock markets around the world mostly slumped on Monday after deadly attacks by Hamas from the Gaza Strip prompted Israel to declare war.
The price of a barrel of West Texas Intermediate oil jumped by almost $5 to more than $86 US a barrel, mostly on concerns that the volatile situation could ensnare more countries in the region.
Israel is a marginal oil producer, but nearby nations in the Middle East are major suppliers, and if they get involved in the fighting, global supplies will be significantly impacted.
Analysts say that the conflict could also lead to a reduction in oil supply if the United States, an ally of Israel, takes a tougher stance against Iran, which is accused of helping Hamas plan the attacks.
The Toronto Stock Exchange was closed for the Thanksgiving holiday on Monday, and most major Asian markets are also closed. But the New York Stock Exchange was open and benchmarks like the Dow Jones Industrial Average and the S&P 500 were both lower.
Shares in weapons makers and military contractors surged
While shares in travel and leisure companies, such as airlines and cruise ships, tumbled.
Tel Aviv’s main stock benchmark was down 0.4 per cent on Monday, after closing 6.5 per cent lower on Sunday. Israel’s Central Bank said it will sell up to $30 billion US in foreign exchange to prop up the shekel, which fell to a near 8-year low.
Analysts say that traders are struggling to assess how the latest geopolitical risk will unfold and potentially impact inflation and growth trends.
The conflict between Israel and Hamas is a long-running one, and there is no easy solution. The Hamas attacks and the Israeli response are likely to further destabilize the region and could have a significant impact on the global economy.tunesharemore_vert