(Bloomberg) — Oil prices rose more than 5% after Hamas’ surprise attack on Israel sparked fears of a wider conflict. Investors have traditionally shunned risky assets like stocks and instead bought gold, bonds and the dollar.
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West Texas Intermediate rose above $87 a barrel and an index of the dollar’s strength gained 0.3%. Europe’s Stoxx 600 index fell 0.4% and US futures also fell. Gold rose 1%.
The Israeli shekel weakened 2% to its lowest level in seven years, even after the Bank of Israel unveiled an unprecedented program to support markets. The central bank plans to sell up to $30 billion in foreign exchange and extend up to $15 billion through swap mechanisms to support markets.
“The weekend’s events are obviously destabilizing the region,” said Kyle Rodda, senior market analyst at Capital.com. “Ultimately, these events typically only have a short-term impact on financial markets and it is likely that this will be the case again. Investors could remain nervous for a few more days until the risk of escalation has subsided significantly.”
The fallout from the attacks rocked markets in the Middle East on Sunday. Key stock indicators in the region fell, led by a decline in Israel’s benchmark TA-35 stock index, which posted its biggest loss in more than three years. The benchmark edged up 0.5% on Monday after plunging 6.5% in the previous session.
The violence is clouding the prospects of companies that derive some of their revenue from Israel and threatening to depress the shares of some global generic drug makers, chipmakers, diamond processors and software services providers.
Read more: Israel-related stocks under pressure after shock Hamas attack
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Although recent events do not pose an immediate threat to oil flows, traders fear the conflict could become a proxy war. The US said it would send warships and the Wall Street Journal reported that Iranian security officials helped plan the attack.
Iran is both a major oil producer and a supporter of Hamas. Any retaliation against Tehran could jeopardize the passage of ships through the Strait of Hormuz, a vital link that Iran has previously threatened to close.
“Any expansion to oil-producing countries, especially Saudi Arabia, could make the price of crude oil more expensive, with negative inflationary effects for the West and mean higher interest rates in the long term,” said head of strategy Guillermo Santos at the Spanish private bank iCapital.
Trading in U.S. Treasury bonds will be closed on Monday due to a holiday.
Elsewhere, Metro Bank shares rose 20% after the troubled British lender put together a 925 million pound ($1.1 billion) financing package, a deal that imposes a 40% haircut on some bondholders and leads to the Colombian financier Jaime Gilinski taking a majority stake.
The deal gives the British retail and commercial bank much-needed breathing space after a tumultuous week that saw its share price fluctuate and consultancy EY reach out to a number of lenders to submit offers.
Important events this week:
Money supply in China, new yuan loans, Monday
Bank of England policymaker Catherine Mann speaks on Monday
The annual meetings of the World Bank and IMF begin on Monday in Marrakech, Morocco
Fed Vice Chairman Michael Barr speaks on Monday
Dallas Fed President Lorie Logan speaks Monday
Fed Governor Philip Jefferson speaks on Monday
Japanese balance of payments, Tuesday
BOE publishes the minutes of the fiscal policy meeting on Tuesday
The IMF releases its latest global economic outlook on Tuesday
US wholesale inventories, Tuesday
Fed Governor Christopher Waller delivers his keynote speech on Tuesday
Minneapolis Fed President Neel Kashkari speaks Tuesday
Germany CPI, Wednesday
Meeting of NATO defense ministers on Wednesday in Brussels
Russian Energy Week in Moscow with representatives of OPEC members and others, Wednesday
US FOMC minutes, PPI, Wednesday
Fed Governor Michelle Bowman speaks during the World Bank-IMF meetings on Wednesday
Japanese machinery orders, PPI, Thursday
Asahi Noguchi of the Bank of Japan speaks on Thursday
British industrial production, Thursday
ECB publishes report on September monetary policy meeting on Thursday
BOE’s Huw Pill speaks on Thursday
US initial jobless claims, CPI, Thursday
China CPI, PPI, trade, Friday
The G20 finance ministers and central bankers will meet on Friday at the IMF meeting
ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak at the IMF panel on Friday
Eurozone industrial production, Friday
France CPI, Friday
BOE’s Andrew Bailey speaks on Friday
University of Michigan Consumer Sentiment, Friday
Citigroup, JPMorgan, Wells Fargo and BlackRock’s results as the quarterly reporting season begins on Friday
Philadelphia Fed President Patrick Harker speaks Friday
Some of the key moves in the markets:
Shares
The Stoxx Europe 600 fell 0.3% at 9:27 a.m. London time
S&P 500 futures fell 0.8%
Nasdaq 100 futures fell 0.9%
Futures on the Dow Jones Industrial Average fell 0.7%
The MSCI Asia Pacific Index remained unchanged
The MSCI Emerging Markets Index fell 0.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.5% to $1.0528
The Japanese yen rose 0.1% to 149.16 per dollar
The offshore yuan rose 0.2% to 7.2926 per dollar
The British pound fell 0.5% to $1.2176
Cryptocurrencies
Tie up
The yield on 10-year government bonds remained little changed at 4.80%
The yield on 10-year German government bonds fell four basis points to 2.85%
The 10-year UK government bond yield fell two basis points to 4.55%
raw materials
Brent crude rose 2.5% to $86.69 a barrel
Spot gold rose 0.9% to $1,850.02 an ounce
This story was produced with support from Bloomberg Automation.
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