Five Questions on the Recent Escalation in Israel

Tuesday 10 October 2023

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October 2023 | 2 minute read    

   

  • The recent escalation: Hamas, most likely backed by Iran, attacked Israel over the weekend, resulting in a strong response from the Israeli defence forces. The Israeli Prime Minister termed this terrorist attack as an act of war.
  • Hamas seems to be guided by its own weakening domestic position, while Iran and Hamas likely have the objective to derail the ongoing rapprochement between Saudi Arabia and Israel. The conflict may last for the next few weeks, but is likely to remain localised.
  • Geopolitical implications of the conflict: There will likely be ramifications for Israel-Iran, Saudi Arabia-Israel and US-Saudi relations. A more aggressive stance from Israel is expected as it tries to control the conflict and becomes more hawkish on Iran. In addition, the West, particularly the US (as some hostages are US citizens), may be tempted to temporarily shift focus away from Ukraine in terms of military aid. Should the knock-on effect of the attack lead to higher oil prices, this would be negative for US president Joe Biden in an election year.
  • On markets: While we do not expect a major impact as long as the crisis remains local, we see some risks for oil should the conflict take a broader dimension. While we do not change our inflation expectation for next year, the conflict nevertheless adds uncertainty to the inflation path, which is key to assess the economic outlook for the US.

             

Important information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 10 October 2023. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.

Date of first use: 10 October 2023


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