New York/Hong Kong CNN –
Oil prices rose while stock markets and the Israeli currency fell earlier in the week as investors reacted to the war between Hamas and Israel.
Although Israel is not a major oil producer, escalating tensions in the oil-rich Middle East spooked investors who had been selling oil in recent weeks.
Inflation, fears of a global economic downturn and a correction in prices that have risen sharply in recent months had caused U.S. oil prices to fall from about $95 a barrel at the end of September to just over $80 last week.
But on Monday, U.S. oil prices traded down 4% higher above $86. Brent crude, the global benchmark, also rose nearly 4% to trade at nearly $88 a barrel.
Israel officially declared war on Hamas on Sunday after the Islamist militant group launched its deadly surprise attack on Saturday.
More than 700 people were killed in Israel According to authorities, more than 400 Palestinians were killed.
“With the Israeli government warning of a long and difficult war, there are concerns that deep and unremitting retaliatory strikes against Gaza could potentially draw Iran into the conflict and impact the flow of energy in the region,” said Susannah Streeter, head of Money and markets in Hargreaves Landsdown, wrote in a note.
The Israeli shekel weakened on Monday to 3.92 against the US dollar it is the worst Level since 2016.
Israel’s central bank said it would sell up to $30 billion worth of foreign currency to stabilize the currency and “provide the necessary liquidity for the markets to continue to function properly.”
In a statement, the Bank of Israel said it would provide an additional $15 billion in support if needed and said it would “continue to monitor developments, monitor all markets and act as necessary using the tools at its disposal.”
On the stock markets, US stock futures, which rose sharply on Friday due to a surprisingly strong American labor market report, recently fell sharply Sunday.
But casualties were reduced after Israel said on Monday that fighting between the Israel Defense Forces and Hamas inside Israel had stopped and that the IDF had retaken control of all communities around the Gaza Strip.
Dow futures fell 175 points, or 0.52% after previously falling almost 200 points. S&P 500 and Nasdaq futures fell 0.7% and 0.8%, respectively respectively.
Global investors fear that the conflict in Israel could spill over across the region and that ongoing tensions in the Middle East could hurt the fragile global economic recovery.
European stocks also fell at Monday’s open as traders digested the news. But until July 8th By mid-morning ET they had stabilized somewhat, with France’s CAC 40 index falling 0.6%. while the German DAX index fell 0.8%. London’s FTSE 100 rose 0.1%, supported through price gains in the shares of oil companies.
In Asia, initial investor reactions were mixed.
In mainland China, the Shanghai Composite fell 0.4% after reopening after a 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 halt due to a typhoon, while markets in Japan and South Korea were closed for holidays.
The key question for markets now is “whether the conflict remains contained or spreads to other regions, particularly Saudi Arabia,” ANZ analysts wrote in a report on Monday.
“At least initially, it appears that markets expect the situation to remain limited in scope, duration and impact on oil prices. However, higher volatility is to be expected.”
— Robert North contributed to this report.