Summary
The conflict between Israel and Gaza has the potential to disrupt the global economy and financial markets. This report discusses the geopolitical, economic, market, and political implications of the military conflict between Israel and Hamas. The conflict adds to the geopolitical uncertainty, and there is a risk of escalation to a regional conflict that could reduce oil supply and spike crude prices. If Iran is implicated in supporting Hamas, it could lead to direct conflict with Israel, worsening the geopolitical backdrop and impacting the global economy. As a result, safe-haven assets like the U.S. dollar and U.S. Treasuries would likely outperform. The conflict also contributes to deglobalization, hindering regional relations and potentially reinforcing geopolitical fault lines. The voting in the United Nations General Assembly on condemning the attack on Israel will provide insight into sovereign sentiment and potential geopolitical shifts. Internally, Israel’s focus will shift away from local political divisions toward geopolitical risk management. Financial markets may find stability as there is a potential for local political cohesion. However, the Israeli shekel and other financial assets are likely to remain on the defensive, and further depreciation is anticipated. Geopolitics will also play a significant role in upcoming elections in many countries, potentially leading to political fracturing, protectionist policies, and disruptions in financial markets and economic activity. The conflict between Israel and Gaza, as well as the situation in Ukraine, will likely be topics of debate leading up to the 2024 U.S. election and Narendra Modi’s campaign for prime minister in India.
Exploring the Israel-Gaza Conflict: Perspectives and Possible Consequences
