- Violence in Israel intensifies geopolitical risk, potentially directing investors towards safe haven assets.
- Analysts believe rising geopolitical tensions could stimulate demand for gold, U.S. dollar, and U.S. Treasuries.
- The situation in Israel also raises questions about its potential influence on oil prices, especially with Iran’s increased production.
Investors are on high alert as events in Israel amplify the geopolitical risks in markets, with predictions hinting at an inclination towards safe haven assets.
The unexpected aggression from Hamas, a Palestinian group, has put Israel on the world’s radar.
This attack, met with stern denunciations from Western nations, particularly the U.S., might redirect investments into assets deemed as “safe.”
Analysts are drawing attention to assets like gold, the U.S. dollar, and even U.S. Treasuries, especially in light of their recent aggressive sell-offs.
Peter Cardillo, chief market economist at Spartan Capital Securities, emphasizes the situation, stating, “This is a good example of why people need gold in their portfolios. It is a perfect hedge against international turmoil.”
He added, “Anytime there is international turmoil, the dollar strengthens.”
The financial market dynamics have been under the influence of the anticipations surrounding U.S. interest rates and their persistence at heightened levels.
As bond yields rocketed, the U.S. dollar has been tracing a consecutive gains trajectory.
Contrastingly, stocks have been observing substantial losses for the third quarter, although signs of stabilization have emerged recently.
Brian Jacobsen, Chief Economist at Annex Wealth Management, highlighted the uncertainty surrounding the crisis’s potential influence on markets.
He noted, “Whether this is a massive market moment or not depends on how long it lasts and whether others are sucked into the conflict.”
Though Iran has been accelerating its oil output, Jacobsen is skeptical about the situation significantly impacting oil prices.
The endorsement of Hamas’s attack by Iran and its Lebanese allies, Hezbollah, cannot be ignored.
Jacobsen further remarked, “Iranian oil production has been increasing, but any progress they’ve been making behind the scenes with the U.S. will be dramatically undermined by Iran’s celebrating Hamas’s actions.”
He also underscored the importance of Saudi Arabia’s stance, especially as the U.S. seeks to broker a deal promoting normalized ties between Israel and Saudi Arabia.
David Kotok, Chair and Chief Investment Officer at Cumberland Advisors, underlined the concern regarding America’s compromised state due to political unrest in Washington.
With the Republicans in search of a successor for the Speaker of the House of Representatives and an impending budget showdown, Kotok expresses his anxiety.
“I am very worried about more explosive situations that require U.S. determination and U.S. defense capability which is being injured,” by the ongoing Washington chaos, Kotok stated.
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