Oil prices rise, stocks and shekels fall as market war erupts

New York/Hong Kong

Oil prices rose at the beginning of the week, while the stock market and the Israeli currency fell as investors reacted to the war between Hamas and Israel.

Although Israel is not a major oil producer, rising tensions in the oil-rich Middle East spooked investors who were selling oil in recent weeks.

Inflation, fears of a global economic recession and a correction in rising prices in recent months had driven U.S. oil from about $95 a barrel in late September to just above $80 last week.

But US oil prices traded up 4% on Monday Above $86. Global benchmark Brent crude was also up nearly 4% to trade at around $88 a barrel.

Israel formally declared war on Hamas on Sunday after a deadly attack by the Islamic terrorist group on Saturday.

More than 700 people have been killed in Israel and According to officials, more than 400 Palestinians have been killed.

“With the Israeli government warning of a long and difficult war, there are concerns that deep and sustained retaliatory attacks on Gaza could potentially draw Iran into the conflict and impact energy flows in the region,” Susanna Streeter. , head of money and markets at Hargreaves Landsdowne, wrote in a note.

The Israeli shekel weakened on Monday to 3.92 For the US dollar, this is the worst Level from 2016.

Israel’s central bank said it would sell up to $30 billion of foreign currencies to stabilize the currency and “provide the liquidity necessary for the continued proper functioning of the markets.”

In a statement, the Bank of Israel said it would provide $15 billion of additional support if needed, adding that it would “continue to monitor developments, keep an eye on all markets and work with available tools as needed.” ”

In equity markets, US stock futures, which rose on Friday on a surprisingly strong US job market report, fell sharply late in the day. sunday.

But the damage was minimized when Israel said on Monday that fighting between Israel Defense Forces and Hamas inside Israel had stopped, and the IDF had taken back control of all communities around the Gaza Strip.

Dow futures were down 175 points, or 0.52%. After falling about 200 points earlier. S&P 500 and Nasdaq futures were down 0.7% and 0.8% Respectively.

Global investors fear the conflict in Israel could spill over into the wider region, and prolonged tensions in the Middle East could damage the fragile global economic recovery.

European shares also fell at the open on Monday as traders digested the news. But till 8.07 ET, they had steadied slightly, with France’s CAC 40 index down 0.6%, While Germany’s DAX index fell 0.8%. London’s FTSE 100 was up 0.1%, advanced Due to rise in shares of oil companies.

In Asia, initial reaction among investors was mixed.

In mainland China, the Shanghai Composite slipped 0.4% after reopening after the holiday week. Meanwhile, Australia’s S&P/ASX 200 closed 0.2% higher.

Hong Kong’s Hang Seng index rose 0.2% as trading resumed after a morning suspension due to the typhoon, while markets in Japan and South Korea were closed for holidays.

“The key question for markets now is whether the conflict will remain contained or spread to include other regions, particularly Saudi Arabia,” ANZ analysts wrote in a report on Monday.

“Initially at least, it seems that the market will assume that the situation will remain limited in scope, duration and consequences for the oil price. “But higher volatility can be expected.”

—Robert North contributed to this report.

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