The escalating tensions rippling across Israel and Hamas have caused a wave of volatility within the global financial system. This conflict seems to be casting a shadow over various asset classes, leading to a downtick in emerging stocks and cryptocurrencies. At the same time, traditional safe havens such as oil and precious metals are seeing an unexpected boost in value.
The outbreak of what’s now looking like full-blown war emerged amid pre-existing fears hovering over the market, such as the Ukraine-Russia conflict, rising inflation rates, and the possibility of increasing interest rates. US stock indices, including the S&P 500, Dow Jones, Nasdaq, and Wilshire 5000, have experienced declines due to the new turmoil, despite closing positively the Friday before.
The Central Bank of Israel acted swiftly and has lined up to sell as much as $30 billion in foreign currency to maintain market stability. This shift comes as Israeli government bonds take a dive, with the 2120 Hundred Year bond seeing a decrease of 5.3 cents on the dollar to settle at a new record low.
On the commodities front, oil and precious metals, traditional safe-havens during times of unrest, are seeing validating gains. US crude oil and Brent have observed considerable increases, with potential broader implications on the horizon.
The Organization of the Petroleum Exporting Countries (OPEC) had raised its output projections to 116 million barrels per day by 2045. However, the ongoing conflict may change the equation, with discussions about scaling back oil output. This might give a fresh hit to already high oil prices contributing to the existing inflationary pressure—an issue that global economies are grappling with.
Cryptocurrencies, often touted as “digital gold,” didn’t perform as expected. The total market cap of cryptocurrencies shrank by over 2% against the US dollar. Major cryptos like Bitcoin and Ethereum were also affected, registering declines of 1.7% and 2.46% respectively.
Amidst the turmoil, the shekel, Israel’s national currency, destabilized sharply against the US dollar. On the other hand, demand for gold—an entrenched safe haven, rose by around 1.39% to $1,858 an ounce. Silver also edged up by 1.23% at 3:00 p.m. (ET).
No doubt, the Israel-Hamas conflict serves as a stern reminder of how global financial markets swing in reaction to geopolitical events. The immediate financial implications are clear and worrying across asset classes. Yet the long-term effects are still uncertain, and stakeholders await with bated breath to watch the future unfold.
Source: Cryptonews
