Middle East conflict: Have markets really moved on from fear?
By Naomi Rovnick and Marc Jones
LONDON (Reuters) — After Hamas' incursion into Israel on Oct. 7 jolted world markets, an oil surge has reversed, global stocks are now broadly flat and bets on a humanitarian crisis spiraling into a wider regional conflict seem to have faded.
Israel agreed on Thursday to pause operations in northern Gaza for four hours a day according to the U.S White House but risks remain and heavy trading in a range of asset classes from weapons stocks to niche Middle East debt insurance suggest markets have not moved on from fear quite yet.
As investors debate a range of scenarios, here are some assets flashing warning signals and those that may have wild swings ahead.
1/ OPTIONS OPEN
Oil prices are below where they were before Oct. 7. Derivatives markets tell a different story.
Bets on oil prices moving up from here are at their highest level since Russia's 2022 invasion of Ukraine, CME options market volatility data shows.
Average daily volumes in energy options of the CME exchange overall are the highest since an all-time record in 2018.
«The aftermath of the attacks and rising Middle East tensions did not impact oil prices as many investors expected, including ourselves,» Unigestion multi-asset portfolio manager Sandrine Perret said.
«The market is telling you that it's much more concerned about the next $10 rise in oil and the next $50 up move in gold than it is the next $10 or $50 move down,» CME's head of commodities, options and international markets, Derek Sammann.
Gold has dropped more than $50 an ounce after hitting $2,000 last week.
2/ DEBT DANGERS
Signs so far that the conflict is contained have helped Israel's bonds and those of neighbours Jordan and Egypt recover from post-attack
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