Global Markets React to Escalating Conflict in the Middle East

Global markets were impacted on Monday as tensions escalated between Israel and the Palestinian Islamist group Hamas. The S&P 500 and the Nasdaq experienced declines, while safe-haven assets such as gold and the U.S. dollar saw gains. Crude oil prices also rose by over 3% due to the heightened conflict.

Israel reported that its troops, supported by helicopters, had killed armed infiltrators entering the country from Lebanon, raising concerns that the fighting could spread. The Israeli military called up an unprecedented 300,000 reservists and imposed a total blockade of the Gaza Strip, indicating the possibility of a ground assault. The United States announced its support by sending multiple military ships and aircraft closer to Israel.

As a result of the escalating conflict, major technology stocks including Apple, Microsoft, Alphabet, Nvidia, and Amazon.com experienced declines. Traditional safe-haven assets, such as gold, and the U.S. dollar gained value. Energy stocks, on the other hand, saw a rise of nearly 3%.

The conflict also impacted the airline industry, with United Airlines, Delta Air Lines, and American Airlines suspending direct flights to Tel Aviv. This led to a 4.4% decline in the S&P 500 Passenger Airlines index. Defense companies, including Northrop Grumman, RTX, General Dynamics, and Lockheed Martin, experienced stock price increases ranging from 5.5% to 8.5%.

Exchange-traded funds exposed to Israel, such as iShares MSCI Israel ETF and the ARK Israel Innovative Technology ETF, saw declines of 7.6% and 4.4%, respectively.

Looking ahead, investors will focus on key inflation readings, including September’s producer price and consumer price indexes, as well as the Federal Reserve’s September meeting minutes. Quarterly earnings reports from major banks like JPMorgan Chase, Wells Fargo, Citigroup, and asset manager BlackRock will also be closely watched.

In other news, Tesla’s China-made electric vehicle sales volume for September decreased by 10.9% compared to the previous year, resulting in a 2.5% drop in the company’s stock.

While the conflict in the Middle East continues to impact global markets, investors are advised to expect short-term volatility as tensions persist.