Oil price surges 4% as attack on Israel prompts fears of expanding Middle East violence
Oil prices jumped and stock markets around the world mostly slumped fter deadly attacks by Hamas from the Gaza Strip prompted Israel to declare war. The price of a barrel jumped by almost $5 on Monday, mostly on concerns that the volatile situation could ensnare more countries in the Middle East.
Many stock markets are closed Monday, but U.S. exchanges see declines
Pete Evans · CBC News
Oil prices jumped and stock markets around the world mostly slumped after deadly attacks by Hamas from the Gaza Strip prompted Israel to declare war.
The price of a barrel of West Texas Intermediate oil jumped by almost $5 to more than $86 US a barrel on Monday, mostly on concerns that the volatile situation could ensnare more countries in the region.
Israel is a marginal oil producer, but nearby nations in the Middle East are major suppliers, and if they get involved in the fighting, global supplies will be significantly impacted.
“While oil fundamentals have not changed since these attacks, it does not mean they won’t,” said Warren Patterson, head of commodities strategy at Dutch bank ING. “There are reports that Iran helped Hamas plan the attacks and gave them the green light. If this is proven to be true, we could see the U.S., an ally of Israel, taking a tougher stance against Iran, which could ultimately lead to a reduction in oil supply.”
The Toronto Stock Exchange was closed for the Thanksgiving holiday on Monday, and most major Asian markets are also closed. But the New York Stock Exchange was open and stocks mostly slumped to start with and rebounding somewhat later in the day. The S&P 500 was 0.6 per cent higher in its first trading since the attack. Trading has been unsteady, with the benchmark index falling as much as 0.6 per cent earlier.
Traders assess geopolitical risk
Shares in weapons makers and military contractors surged: Northrop Grumman and RTX each rose 3.6 per cent while Lockheed Martin jumped 4.6 per cent.
Tel Aviv’s main stock benchmark was down 0.4 per cent. It closed 6.5 per cent lower Sunday, after the attacks. Early Monday, Israel’s Central Bank said it will sell up to $30 billion US in foreign exchange to prop up the shekel, which fell to a near 8-year low.
Edward Moya, an analyst with foreign exchange firm Oanda, said: “It was supposed to be a quiet Monday morning given the Columbus Day holiday,” but following the unexpected Hamas attack, “traders are struggling to assess how this latest geopolitical risk will unfold and potentially impact inflation and growth trends.”
ABOUT THE AUTHOR
Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: firstname.lastname@example.org
With files from The Associated Press