Key Takeaways:
- The Israel-Hamas war triggered a downtrend in the risk-on stock market.
- Experts advise against panic in times of heightened volatility.
- Oil prices pump, promising more profits to US-based oil and gas companies.
YEREVAN (CoinChapter.com) — The attack on Israel by the Palestinian group Hamas from the Gaza Strip, involving aerial, sea, and ground operations, initiated on Oct 7 and rages on as of publication. The biggest escalation in decades added geopolitical risk to an already fragile market dealing with inflation and surging interest rates.
On Oct 9, futures tied to the Dow Jones Industrial Average fell 125 points, or 0.4%. Another US stock index, S&P 500 futures, lost 0.5%, while Nasdaq 100 futures slipped 0.6%.
The attack also weighed on shares of global companies with local connections in the region. Tech and AI giant Nvidia Corp., with an office in Tel Aviv and Israel-based Applied Materials Inc. were also dragged down in premarket trading.
Experts warn investors to stay calm despite the coming storm
Nigel Green, the chief executive of deVere Group, warned of more turbulence in the coming weeks. However, he also noted that panic-led decisions could exacerbate the situation.
I would urge investors to avoid knee-jerk reactions to the oil price surge and geopolitical tensions that are creating the market turbulence. Investors are likely to profit by sitting still and not selling and then having to buy back at higher prices.
Green told CoinChapter.
The CEO asserted that while the uncertainty can be frightening, it’s essential to maintain a long-term perspective when making investment decisions. “Historically, markets have rebounded from geopolitical crises, and a well-constructed portfolio can weather such storms,” he concluded.
Manish Bhargava, a fund manager at Straits Investment Holdings Pte, agreed that markets should expect further volatility while military operations in the Middle East continue.
The attack on Israel could lead to increased volatility in markets and make investors more risk-averse in the near term. If geopolitical tensions flare up in the Middle East and there is disruption to oil production or transportation, then it could lead to much higher oil prices.
Bhargava noted.
Oil price jumps as equities jitter.
Generally, oil prices have a pivotal role in the world economy due to oil’s interconnectedness with various sectors and its potential to influence investor sentiment. Thus, the fresh geopolitical hotbed in the Middle East resulted in a “typical” oil price surge, setting the market turbulence in motion.
West Texas Intermediate (WTI) crude oil futures were up by 3% on Oct 9, trading near $85 a barrel, while Brent crude was up $2.70, or 3.2%, to $87 a barrel.
Notably, the oil price rally reversed the previous week’s downtrend – the largest weekly decline since March. The latter sent Brent down 11%, and WTI retreated more than 8%.
US-based Oil and Gas companies profit
Similar to 2022, when the Russia-Ukraine war first erupted, the Israel-Hamas conflict could promise profits to oil and gas companies in the US. In detail, Russia’s invasion of Ukraine resulted in a plunge of Russian Gazprom stocks, paving the way for its American counterpart to take the lead.
For example, ExxonMobil, a Liquified Natural Gas (LNG) giant based in Texas, US, saw a 270% uptrend in its XOM stock price per share since hitting the local bottom in late Oct 2020. As a result, the company announced record profits of $55.7 billion in 2022.
Amid the fresh conflict, XOM stock jumped to $110 per share in presale, promising more rewards to investors.
Similarly, Cheniere Energy, Inc., another LNG company headquartered in Texas, previously benefitted from macroeconomic turmoil.
In February 2016, it became the first US company to export liquefied natural gas. In 2018, it was a Fortune 500 company. And in 2022, the company’s shares (ticker: LNG) soared right after the war in Ukraine started. As of Oct 9, the LNG stock jumped to $166 in presale.
