World shares experienced a decline, and oil prices displayed mixed movements on Monday as investors prepared for an anticipated Israeli invasion in the Gaza Strip.
Futures for the S&P 500 increased by 0.2%, and those for the Dow industrials saw a gain of 0.3%. Germany’s DAX dipped by 0.1% to 15,168.16, while the CAC 40 in Paris posted a marginal decrease of less than 0.1%, landing at 6,999.82. In contrast, Britain’s FTSE 100 rebounded from early losses, registering a 0.3% gain at 7,624.99.
Israeli forces, reinforced by an increasing presence of U.S. warships in the region and the mobilization of approximately 360,000 reservists, have strategically positioned themselves along Gaza’s border. They have also conducted drills in preparation for what Israel characterizes as a comprehensive operation aimed at dismantling the militant group Hamas.
Over the past week, over a million people have evacuated their homes in the blockaded enclave in anticipation of the imminent invasion, which is intended to eliminate Hamas’ leadership following a deadly attack that occurred on October 7.
RaboResearch Global Economics and Markets aptly noted, “Given the circumstances, it’s entirely understandable that markets are feeling anxious.” “The world now holds its breath as Israel prepares for a full-scale ground invasion of Gaza, with only unseasonal torrential rain delaying the seemingly inevitable.”
The ongoing conflict has sent shockwaves through the oil markets, compounding the existing uncertainties surrounding the global economic outlook. While the Gaza region doesn’t play a major role in oil production, concerns are mounting that the violence could spill over into the politics surrounding the oil market, potentially leading to disruptions in the petroleum supply chain, which could have far-reaching consequences for various industries.
At the beginning of the week, U.S. crude oil saw a modest uptick of 4 cents, reaching $87.73 per barrel. Last Friday, the price of benchmark U.S. crude surged by $4.78, settling at $87.69 per barrel.
Meanwhile, Brent crude, the international standard, experienced a minor drop of 10 cents, reaching $90.79 per barrel. On Friday, it had risen by $4.89, closing at $90.89 per barrel.
Apprehensions about the state of the U.S. economy have cast a shadow on the recent optimism regarding the Federal Reserve’s potential pause in interest rate hikes aimed at curbing inflation. The persisting inflationary pressures coupled with higher oil prices have raised doubts about this outlook, jeopardizing confidence in the “remarkable resilience” of the U.S. economy that had been propping up stock markets until a few months ago, as noted by Stephen Innes of SPI Asset Management.
In Asian trading on Monday, Tokyo’s Nikkei 225 dropped by 2% to 31,659.03, while the Hang Seng in Hong Kong lost 1% to 17,640.36. South Korea’s Kospi declined by 0.8% to 2,436.24. The Shanghai Composite index also dipped by 0.5% to 3,073.81, with Bangkok’s SET falling by 1.6%, and Australia’s S&P/ASX 200 down 0.4% at 7,026.50.
On Friday, U.S. stocks experienced a mix of optimism and fear, which led to most indices losing ground. The S&P 500 slipped by 0.5%, and the Nasdaq composite fell by 1.2%, while the Dow industrials inched up by 0.1%.
The concerns related to the conflict caused Treasury yields to decrease, a common occurrence when investors seek safer assets during times of uncertainty. However, early on Monday, the yield on the 10-year Treasury had risen to 4.69% from 4.63% late on Friday.