Oil prices rallied while the dollar and yen advanced Monday after Hamas launched a shock attack on Israel at the weekend, sparking fresh concerns about tensions in the Middle East.
The crisis fanned concerns about supplies of crude from the region at a time when supply worries are already high owing to Saudi Arabia and Russiaās output cuts.
It has also renewed fears about the impact on inflation, with energy costs a key driver of spiking prices, giving a fresh headache to central banks as they try to ease up on interest rate hikes to avoid recessions.
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The surprise attack and Israelās declaration of war in response to it have left more than 1,000 dead and raised concerns that a potential broadening of the conflict could draw in the United States and Iran.
āKey for markets is whether the conflict remains contained or spreads to involve other regions, particularly Saudi Arabia,ā said ANZ Groupās Brian Martin and Daniel Hynes.
āInitially at least, it seems markets will assume the situation will remain limited in scope, duration, and oil-price consequences. But higher volatility can be expected.ā
Both main contracts surged more than five percent in early Asian business before easing back as the day wore on.
However, SPI Asset Managementās Stephen Innes warned: āHistorical analysis suggests that oil prices tend to experience sustained gains after the Middle East crises.
āMeanwhile, stocks tend to eventually recover and trend higher after an initial period of volatility. Safe-haven assets like gold and Treasurys, which initially see gains during such crises, tend to fade from their initial price spikes as the situation stabilises.
āBut with Middle East analysts considering this to be a pivotal moment for Israel, the view looks incendiary in any current scenario.ā
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