© Reuters Investing.com – European market indices remain on edge -, at the start of the trading week after Hamas’ unprecedented attack on Israel reignited conflict in Gaza and the Middle East.
Franco Machiavelli, head of analysis at Admirals Spain, analyzes the possible consequences of this tragic situation: “The new war between the Palestinians in Gaza may have ended for the time being the hope of normalizing relations between Israel and Saudi Arabia. Arabia. This can disrupt financial markets and cause market volatility. As for the Israeli currency, it has seen a decline of approximately 10% and is likely to continue to break in the coming days. “Investment in the Israeli tech sector will naturally suffer,” adds Machiavelli.
Amidst the war on inflation, markets are closely monitoring the possibility of contagion in stocks if a major hike involves the participation and intervention of other countries. .
The biggest winner in the ongoing war?
The latest conflict could negatively impact oil prices, possibly exceeding $100 per barrel in the short term.
To put it into context: Let’s remember that half a century ago, OPEC stopped exporting crude oil to countries that supported Israel during the Yom Kippur War. However, the current situation is different than it was 50 years ago, Machiavelli says: “All the Arab countries “are not united in a joint attack on Israel, but countries like Syria, Jordan, Saudi Arabia and Egypt remain neutral.”
This expert adds: “However, the current situation is very delicate due to tension and the risk of escalation by any factor that includes external interference on behalf of Israel, especially after the recent statements of Joe Biden, who recognized the unity. The countries’ full support for Israel.”
For Iran, crude oil production is expected to increase by about 700,000 barrels per day this year, making it the second most important source of additional supply after US oil in 2023.
He continues: “However, it is comforting to remember that one reason the White House tolerated Iranian oil exports in the past was because of the negative impact on Russia, but the current climate model changes the situation, so a renewal deal is in doubt.”
Machiavelli expects renewed conflicts in the Middle East to lead the Biden administration to tighten economic sanctions, which, as we noted above, could push oil prices above $100.
“On the other hand, Russia and Venezuela could benefit from this environment, as both countries face sanctions that have affected their oil exports,” he warns.
Machiavelli says, “If Washington decides to impose additional sanctions on Iran, it will open the door for Russia to gain market share in oil exports and achieve higher prices, which is recognized by Russia. Additionally, Venezuela will benefit if the US administration eases sanctions. A move to reduce pressure.” “. in the oil market.
He concludes, “Development in the coming weeks will be critical in determining the global situation and larger geopolitical and macroeconomic outcomes, but until then, the market can choose to be risk averse as a smart move, show more risk aversion and choose safe havens.”
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