A global risk aversion could occur if the conflict in the Middle East escalates. Furthermore, the market is beginning to consider the possibility that one of its large oil producers, Iran, take sides and cut world production by around a trillion dollars. At the same time, safe haven assets begin to take precedence.
“Without a doubt, the attack perpetrated by Hamas on Israel and its response caused an increase in uncertainty in international markets with its consequent fly to quality”indicated in a report Invest in the Stock Market (IEB). This term, precisely, refers to a financial market phenomenon that occurs when Investors sell what they perceive to be riskier investments and buy safer investments.
Petroleum
An escalation of Israel’s war against Hamas could involve more countries, including Iran, which would raise the price of oil to US$150 per barrel and cut world production by around one million barrelsaccording to Bloomberg Economics.
Shinwoo Kim, fund manager at T. Rowe Pricemaintained that “the price of oil may remain high while the markets evaluate the impact on raw materials supply chains. Although the direct risk to the oil market may not seem so serious, since Israel produces a negligible amount of the world’s oil supply, the indirect risk from a supply point of view is that “Iran could become involved in the war, which would lead to an aggressive reinforcement of sanctions on Iranian oil exports.”
In fact, the price of a barrel of oil rose this day in New York after new clashes took place between the Israeli army and Hamas.despite diplomatic efforts to contain the conflict, at a time when the arrival of the President of the United States, Joseph Biden, to Tel Aviv is expected tomorrow in a show of the White House’s support for the government of Benjamin Netanyahu.
A barrel of the WTI variety rose 0.8% and was traded at US$87.30; while the Brent rate grew 0.9% and was agreed at US$90.40according to figures recorded in the New York Mercantile Exchange (NYMEX).
The crisis in Israel comes at a time when global energy markets are already strainedgiven the uncertain situation caused by the war in Ukraine and the energy crisis unleashed in 2021 following the economic consequences caused by the Covid-19 pandemic.
Production cuts by Saudi Arabia, other OPEC members and Russia indicate there is considerable spare capacity in case oil supplies are unexpectedly reduced. However, there is still uncertainty about how that country might respond given recent tensions with the United States.
Gold
Gold prices rose on Tuesday as investors analyzed developments in the Middle East and they were waiting for the speech that the president of the Federal Reserve, Jerome Powell, will give this week to obtain more clues about the path of interest rates in the United States.
Spot gold gained 0.2% to $1,923.28 an ounce, and US gold futures rose 0.1% to $1,936.30.
US President Joe Biden will make a high-level visit to Israel on Wednesday, as the humanitarian crisis in Gaza worsens. “Until there is some type of ceasefire or de-escalation, gold will hover above $1,900”said Everett Millman of Gainesville Coins. Bullion, considered a hedge against political and financial uncertainty, has advanced more than 4% so far in October.
Source: Ambito
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