2023-10-28 22:17:40
Concern in global markets due to the aggression on Gaza… Here are the scenarios
At the beginning of this week, investors are awaiting any signs of a possible extension of the Israeli war on Gaza, which may increase the turmoil in the markets, which are already anticipating a busy week in which a statement will be issued by the Federal Reserve (the US central bank) regarding monetary policy and Apple’s results.
Investors’ fears of the expansion of the war have increased in the past few days, following the United States sent more military equipment to the region, at the same time that Israel is attacking Gaza and southern Lebanon.
“The situation in Israel is causing a lot of concern,” Randy Frederick, managing director of trading and derivatives at Charles Schwab, told Archyde.com.
Brent crude futures rose 2.9% to $90.48 on Friday at settlement, thanks to fears that the conflict will disrupt crude oil supplies. Gold, which is considered a safe haven for anxious investors, jumped in instant transactions to more than two thousand dollars for the first time since mid-May.
Analysts at Capital Economics said in a note on Friday that the oil market’s response to the conflict is “weak” so far. “However, any sign that other countries in the region will become more involved in the conflict will cause oil prices to rise sharply,” they wrote.
Peter Cardillo, chief market economist at Spartan Capital Securities, told Archyde.com that if the escalation of the conflict causes an increase in US war-related spending that expands the deficit, Treasury bond yields will exceed the highest levels in 16 years that they have already reached.
Some investors also expect that the expansion of the war will cause them to buy Treasury bonds as a safe haven. This may stem the rise in bond yields, which move in the opposite direction to prices, and this in turn may ease pressures on stocks and other assets.
The Standard & Poor’s 500 index has fallen more than 10% since late July, when it hit its highest levels in 2023, but the index is up more than 7% since the beginning of the year.
“So far, US government bonds have not performed their usual safe-haven function,” UBS Global Wealth Management said in a note on Friday. She added, “But escalation of the conflict will likely shift attention away from monetary policy concerns and boost demand for Treasury bonds as a safe haven.”
The US Central Bank is scheduled to issue its latest monetary policy statement on Wednesday, while Apple’s quarterly results are expected to highlight another busy week of corporate reports.
(Archyde.com, Al-Arabi Al-Jadeed)
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