Here are the effects of Hamas on the markets

10 October 20237 months ago babelfish

Hamas attack on Israel, what will be the effects on geopolitics and markets. The point of Antonio Cesarano, Chief Global Strategist, Intermonte

Hamas's attack on Israel over the weekend caught not only investors but also Israeli intelligence itself by surprise.

Let's try to frame the topic: to have a yardstick of comparison, the Gaza Strip extends over an area approximately twice that of the municipality of Milan, with almost 2 million inhabitants and an average age of 18 years (even if at least 40% of the inhabitants are even less than 14 years old).

Therefore a young population, born largely after the death of Arafat (in 2004), historic president of the PNA (Palestinian National Authority), whose authority many today tend to no longer recognize. The Hamas attack was carried out using tools that were not technologically advanced but were still capable of piercing the intelligence network. There are many Palestinian hostages, which makes it more likely that the Israeli counterattack (an obligatory move given the surprise attack) could result in a guerrilla war, which could partly take place in the long tunnels that Hamas has dug under the Gaza strip, called "meter".

This is the brief premise to which it may be appropriate to add further considerations. The attack came while talks had been underway for some time between Arabia and Israel with the participation of the USA, with the formal aim of achieving recognition of Israel by Arabia. In exchange, Arabia sought to obtain a greater guarantee of coverage of its security needs – also in view of the progressive easing of US involvement in the region – as well as access to Israeli technologies for the development, among other things, of nuclear power for use civil. All in the context of the Arab "Vision 2030" plan, which aims to reduce dependence on oil revenues.

In light of these premises, some initial considerations:

The Hamas attack calls into question the potential Arab-Israeli agreement, putting it on the back burner at least for the moment.
The Israeli counterattack could result in a rather long guerrilla war, with the risk of the conflict spreading to other actors, first and foremost Iran.

These considerations lead to a first implication on the oil front: in recent days the price of a barrel has fallen in view of the slowdown in demand, as a consequence, among other things, of the contraction in US demand due to the disappearance of various driving factors since October. support (return of student loan payments, end of excess savings, impact of rising interest rates and energy).

Factors of geopolitical tension, such as, for example, the possibility that Saudi Arabia decides to extend the production cuts currently decided until the end of 2023 to part of 2024, could now be added to other factors, the extent of which could at least slow down the drop in oil and/or provide significant support in terms of price. Non-geopolitical factors include, for example, the US need to restore strategic stockpiles, which have reached their lowest level since the 1980s.

Another indirect impact of the worsening of geopolitical tensions could be an acceleration of the macroeconomic cooling mentioned above, such as to increase the risk of a recession in 2024 for the USA too.

In summary, the impact of the crisis in Israel could mainly concern two fronts: the duration of the counteroffensive and the particular macro moment on which it is based. At the moment, therefore, we can foresee an acceleration of the macro slowdown already evident in the Euro area, which should progressively also involve the USA starting from the end of 2023, but which could lead to a positive outcome: the increase in demand for bonds, in given the halt and potential reversal of monetary policies. This is also an important scenario for imagining an easier refinancing process by global governments and especially by the US high yield sector, in view of increasing maturities in the coming quarters and years.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-gli-effetti-di-hamas-sui-mercati/ on Tue, 10 Oct 2023 05:18:43 +0000.