Oil prices rose after Hamas launched a surprise strike on Israel, raising worries of a larger battle. Investors abandoned typically riskier assets like equities in favor of gold, bonds, and the currency.
The West Texas Intermediate crude oil price increased 4% to $86 a barrel, sparking a rally among energy producers. Gold gained 1%, while the dollar strength index gained 0.3%. Tesla Inc., Amazon.com Inc., and Nvidia Corp. were among the worst performers in premarket trade, along with airlines. Defense and energy firms were on the rise, led by Lockheed Martin Corp. and Exxon Mobil Corp. The Stoxx 600 in Europe fell 0.3%.
The decline of the Israeli shekel
Even after the Bank of Israel announced an extraordinary market assistance program, the Israeli shekel fell about 2%, reaching its lowest level in seven years. To boost markets, the central bank intends to sell up to $30 billion in foreign exchange and extend up to $15 billion through swap mechanisms.
The benchmark TA-35 stock index in Israel increased 0.4% after recovering a 1.3% loss earlier in the day. On Sunday, the index fell 6.5%. Stock markets around the Middle East plummeted on worries that the violence will develop into a wider conflict, with Dubai’s benchmark index falling 2.9%.
European gas prices rose 11% after Israel ordered Chevron Corp. to halt production at the Tamar facility due to safety concerns. After Egypt intended to begin liquefied natural gas exports this month, just before the European winter, the halt may result in fewer onward shipments or perhaps delays.
Impact of war
Airline stocks fell as the war drove up the price of oil and aviation fuel. On Monday, the Bloomberg World Airlines Index fell as much as 1.5%. British Airways parent IAG SA led European falls, falling 5.8%, while Ryanair Holdings Plc, which has a service to Tel Aviv, fell 3.6%.
While the current developments do not pose an immediate danger to oil shipments, traders are afraid that the conflict might devolve into a proxy war. The US announced the sending of warships, and the Wall Street Journal stated that Iranian security officials assisted in the planning of the operation.
Iran is a big energy producer as well as a Hamas backer. Any response against Tehran may jeopardize shipping traffic through the Strait of Hormuz, a critical passageway that Iran has already threatened to stop.
Trading in US cash Treasuries is halted on Monday due to a federal holiday.
In other news, Metro Bank Holdings Plc’s riskiest bonds rose the most on record on Monday after the troubled UK lender secured a £925 million ($1.1 billion) financing package, which will impose a 40% haircut on some bondholders and see Colombian financier Jaime Gilinski take a controlling stake.
