Marketmind: MidEast tension keeps markets on edge

investing.com:

Although price moves remain contained in the absence of a dramatic weekend escalation, world markets are still on edge as Middle East tension builds without obvious resolution.

Disputed reports of a temporary ceasefire in southern Gaza partly stabilised jittery macro prices first thing on Monday. But Israel denied these, bombardment of the enclave resumed and the unfolding conflict continues to loom large over an otherwise packed events diary this week.

For investors, crude oil continues to be most sensitive to the risk of widening regional war and most capable of emitting shocks through other markets by reigniting both inflation and economic demand fears simultaneously.

For now, oil has reacted directionally as many would suspect, although the extent of its climb remains modest given the political stakes. U.S. crude hovered about $87 per barrel on Monday — marginally off highs hit late last week, still down some 8% from late September peaks, and little changed year-on-year. Yet the extent to which the backup in oil prices over recent months can impact wider economic sentiment was clear from the University of Michigan's household survey on Friday. It showed a drop in confidence this month alongside a sharp upward tilt in inflation expectations. But with U.S. Treasury bonds and the dollar also tending to benefit from Middle East anxieties, the picture becomes messy and suggests a more general retreat from risky assets like stocks is still the playbook on any rise in geopolitical heat. As with prior influential political narratives, weekends tend to be nervy periods when markets are closed or illiquid and Fridays a time for battening down hatches just in case. That appeared to be the case last week as oil prices, gold, the