Column-For investors, Middle East conflict rarely moves dial for long: McGeever
By Jamie McGeever
ORLANDO, Florida (Reuters) — While exceptions prove the rule, conflagrations and war in the Middle East have for 20 years rarely caused global investors to de-risk or rethink their strategies — a thesis that will be tested once again this time around.
As long as these conflicts stay regional and don't draw in multiple other countries, initial «safe haven» investment flows have been short-lived. While the human tragedy dominates the broader global news agenda, its hold on global markets has typically loosened pretty quickly.
This is particularly true of the Israel-Palestinian conflict, which has had several flashpoints over the decades that have threatened to spill beyond borders.
As often, this month's violent shock and potential for a wider conflict adds significant financial risk — most notably via energy prices that feed off the region's pivotal oil- and gas-producing role. But overarching drivers like the global economic cycle and U.S. monetary policy usually hold sway.
Three episodes in the last 20 years are typically cited as examples of what might play out this time: the Lebanon War in 2006 and the Gaza Wars of 2008-09 and 2014. None saw a lasting «flight to safety» from investors.
Even during the most serious of those conflicts in 2006, the broad market impact didn't really endorse a headlong «safety» playbook — gold and market volatility fell, and even oil was lower at the end of the conflict than the start.
With thousands of civilians on both sides already dead and Israel preparing a ground invasion of Gaza following Hamas's Oct. 7 attack, investors appear mindful of that pattern. Stocks are higher than they were on Oct. 6 and sovereign bonds that often act as a haven are lower.
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