Investors on guard for oil price spike as Middle East turmoil rattles markets
By Lewis Krauskopf and Naomi Rovnick
(Reuters) -Fears of a widening conflict in the Middle East are threatening more volatility for investors after a painful stretch in U.S. markets.
Israel's troops were battling on Monday to clear out Hamas gunmen more than two days after they burst across the fence from Gaza on a deadly rampage, and the army said it would soon go on the offensive after the biggest mobilization in Israeli history.
Investors were on guard for the potential of the conflict spreading to embroil other countries, including Iran, and a continued spike in oil prices. The S&P 500 was down 0.3% on Monday morning, while Brent crude was up around 4% to $88.10 per barrel. Prices for gold, a popular destination for investors during uncertain times, were up 0.9% at $1,849.40 per ounce.
«The coming days are likely to be driven by geopolitical risks, rather than fundamentals,” said Mohit Kumar, chief Europe economist at Jefferies in London. „For markets, the geopolitical risks add another uncertainty for investors when convictions are already low.“
Geopolitical events have, in many cases, had only fleeting effects on markets. Nevertheless, the escalating conflict comes at a time of heightened uncertainty for investors, as they grapple with a historic sell-off in U.S. Treasuries and volatility in stocks.
Market participants said repercussions from the conflict risked exacerbating several trends that have weighed on risk assets in recent months. Among those is a potential rebound in oil prices that could weigh on U.S. economic growth and endanger the so-called soft landing narrative that has helped boost stocks this year.
“The worst-case scenario from a geopolitical risk perspective would be a full-scale confrontation
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