The recent outbreak of violence in Israel has prompted investors to turn to safe-haven assets like gold as they monitor Middle East developments for potential geopolitical risks in the markets.
Over the weekend, armed members of the Palestinian group Hamas launched an unprecedented attack inside Israel. Western nations, led by the United States, condemned the attack and expressed support for Israel.
Analysts noted that increasing geopolitical risks tend to drive investment into assets such as gold and the U.S. dollar. They also anticipate heightened demand for U.S. Treasuries, which have experienced significant selling pressure. As Asian trading began on Monday, these trends materialized, with U.S. stock futures declining while crude oil, gold, and Treasuries saw increased interest.
Peter Cardillo, the chief market economist at Spartan Capital Securities, emphasized the importance of including gold in investment portfolios during times of international unrest, highlighting its role as a hedge against global turmoil. He also predicted that the U.S. dollar would strengthen in such circumstances, as it typically does during international crises.
Recent market movements have been influenced by expectations of prolonged higher U.S. interest rates, leading to surging bond yields and a strengthening U.S. dollar. Although stocks experienced losses in the third quarter, they showed signs of stabilization in the previous week.
Analysts are closely monitoring energy prices as they assess potential ripple effects. Oil prices surged by over $4 per barrel during early Asian trading on Monday.
The situation in Israel has introduced a new geopolitical risk to Wall Street, with its impact on energy prices and global dynamics under scrutiny. Analysts are particularly interested in Saudi Arabia's response, as it could have significant implications. Washington has been attempting to broker a deal normalizing relations between Israel and Saudi Arabia.
David Kotok, the chair and chief investment officer at Cumberland Advisors in Sarasota, Florida, expressed concerns about the situation's implications for the United States, particularly in the context of political dysfunction in Washington. The country faces challenges as it seeks to fill leadership positions and navigate budgetary issues. Kotok underscored the importance of U.S. determination and defense capabilities in addressing potentially explosive situations.
