International oil prices have risen since the Palestinian militant group Hamas carried out an apparently completely unexpected attack from Gaza on Saturday.
There are now concerns about supplies of crude oil from the Middle East. The surprise attack also renewed fears about the effect on inflation as energy costs are a key driver of rising prices.
“Decisive for markets is whether the conflict will remain contained or spread to involve other regions, especially Saudi Arabia,” explain Brian Martin and Daniel Hynes of the financial services company ANZ Group.
Martin and Hynes say at this stage it seems that markets accept that the situation will remain limited in scope, duration and oil price consequences.
“But greater volatility can be expected,” they warn.
Stephen Innes of SPI Asset Management says again historical analysis suggests that oil prices tend to experience sustained increases following crises in the Middle East.
However, Innes also says that stocks tend to recover after a period of volatility and aim higher.
So-called “safe haven” assets such as gold, which initially deliver gains during crises, tend to lose some of their initial price gains as the situation stabilises. The price of gold has already risen by around 1% since the attack.
“But with Middle East analysts viewing the attack as a defining moment for Israel, it is difficult to venture predictions regarding any current scenario,” says Innes.
