Global markets brace for fallout as ME tensions rise

TDT | Manama    

The Daily Tribune – www.newsofbahrain.com

The Israeli-Hamas war has sharpened focus on rising geopolitical risks for financial markets, as investors wait to see if the conflict draws in other countries with the potential to drive up oil prices further and deal a fresh blow to the world economy.

Israel said yesterday it would continue to allow Gazans to evacuate south  as its troops readied for a ground assault on the Hamas-controlled Gaza Strip in retaliation for unprecedented attacks by the Palestinian militant group.

Oil prices leapt nearly 6% on Friday, as investors priced in the possibility of a wider Middle East conflict.

The first indicator of reaction to weekend developments will likely come when oil starts trading in Asia later on Sunday.

"It looks like we’re headed for a massive ground invasion of Gaza and a large-scale loss of life," said Ben Cahill, senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS).

"Anytime you have a conflict of this scale, you will have a market reaction."

"I have no clue whether markets will remain relatively well behaved," said Erik Nielsen, group chief economics advisor at UniCredit.

"It almost certainly depends on whether this latest conflict remains localized or whether it escalates into a broader Middle Eastern war." The S&P 500 (.SPX) fell 0.5% on Friday.

Safe-haven assets saw buying with gold up more than 3% on Friday and the U.S. dollar touching  a one-week high.