Oil spikes and equities fall following Hamas attack on Israel

investmentnews.com:

Oil jumped more than 5% after Hamas’s surprise attack on Israel raised fears of a wider conflict. Investors shunned traditionally risky assets such as stocks and instead bought gold, bonds and the dollar.

West Texas Intermediate climbed past $87 a barrel and an index of dollar strength added 0.3%. Europe’s Stoxx 600 index fell 0.4% and US futures also declined. Gold advanced 1%.

The Israeli shekel weakened 2%, reaching the lowest in seven years, even after the Bank of Israel unveiled an unprecedented program to support markets. The central bank plans to sell as much as $30 billion in foreign exchange, and extend up to $15 billion through swap mechanisms to support markets.

“The events over the weekend obviously destabilizes the region,” said Kyle Rodda, senior market analyst at Capital.com. “Ultimately, these events tend to have only a short-term impact on financial markets, and it’s probable that this time will be the same. Investors could be jumpy for a couple of days until the risks of escalation have clearly diminished.”

The fallout from the attacks rattled markets in the Middle East on Sunday. Major equities gauges in the region fell, led by a drop in Israel’s benchmark TA-35 stock index, which posted its biggest loss in more than three years. The benchmark edged 0.5% higher on Monday after a 6.5% slump in the previous session.

The violence is casting a pall over the outlook for companies that get a part of their revenue from Israel, threatening to hurt shares of some global generic drugmakers, chipmakers, diamond processors and software-services providers. 

While the latest events aren’t an immediate threat to oil flows, traders are concerned the conflict may become a proxy war. The US said it