Equities struggle, oil rallies on fears of broader Middle East war

by AFP Staff Writers
Hong Kong (AFP) Oct 18, 2023
Asian markets mostly fell and oil prices rallied Wednesday on fears that the Israel-Hamas conflict could spill over into a regional war after a blast at a Gaza hospital dealt a blow to President Joe Biden's diplomatic drive.

Markets had enjoyed a healthy run Tuesday on optimism that while Israeli Prime Minister Benjamin Netanyahu was preparing for a ground offensive in the blockaded territory, the crisis could be contained.

Gaza's health ministry blamed Israel for the hospital explosion, but Israel said it was caused by a rocket misfired by Hamas ally Islamic Jihad.

Biden had planned to visit Israel and Jordan on Wednesday to talk to Netanyahu as well as Jordanian King Abdullah II, Palestinian leader Mahmud Abbas and Egyptian President Abdel Fattah al-Sisi in hopes of finding a way to de-escalate.

But news that at least 200 people had been killed at the hospital saw the Arab leaders cancel their summit in Amman and fanned concerns of a regional conflagration, with Iran warning this week that a wider war was becoming "inevitable".

There was an increase in fighting between Israeli troops and Tehran-backed Hezbollah on the Lebanon border.

"The whole region is at the brink of falling into the abyss that this new cycle of death and destruction is pushing us towards," King Abdullah II said following talks with German Chancellor Olaf Scholz in Berlin on Tuesday.

"The threat of this war expanding is real."

Asian markets mostly fell, with Hong Kong, Shanghai, Singapore, Mumbai, Jakarta, Taipei and Manila all down, along with London, Paris and Frankfurt.

Sydney, Seoul, Wellington and Bangkok edged up. Tokyo was flat.

Crude jumped more than two percent at one point on worries about supplies from the oil-rich region in the event of a wider war, with some observers even warning the commodity could head towards $150 a barrel.

- China growth -

Forecast-busting economic growth data out of China provided a shaft of light for traders.

The 4.9 percent third-quarter expansion was slower than the previous three months but much better than analyst estimates, lifting hopes that the world's number-two economy was seeing some stabilisation after a torrid year.

The figures were helped by a healthy jump in retail sales, suggesting the country's consumers are regaining a little confidence, though officials continue to face calls for more stimulus to kickstart the economy.

"The recovery has been gathering strength on the back of a broader consumption recovery which has been aided by policy support," said HSBC's Erin Xin and Jing Liu.

"This has led to positive spill overs for the manufacturing sector. That said, the property sector continues to remain under pressure as recent property policy easing still needs time to help stabilise the sector."

A report showing a better-than-expected rise in US retail sales revived talk of another interest rate hike by the Federal Reserve, even after a string of decision-makers lined up in recent weeks to suggest monetary policy was likely tight enough to bring inflation down.

"Good news about the economy is once again bad news, since it will keep policymakers on the fence on delivering more tightening," said Edward Moya at OANDA.

"It seems the US economy isn't ready to head into a recession just yet."

And SPI Asset Management's Stephen Innes added: "Simply put, the US consumer appears unbowed and utterly unaffected by rising interest rates.

"Contrary to expectations that the US consumer is weakening, recent revisions suggest Americans may still have significant savings.

"The steady stream of strong macro data reinforces the view that economic growth in the US remains robust enough to avoid a recession -- a view that is admittedly increasingly part of a growing consensus."

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: FLAT at 32,042.25 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 17,732.52 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,058.71 (close)

London - FTSE 100: DOWN 0.3 percent at 7,655.24

West Texas Intermediate: UP 2.0 at $88.36 per barrel

Brent North Sea crude: UP 1.7 percent at $91.44 per barrel

Euro/dollar: UP at $1.0580 from $1.0579 on Tuesday

Pound/dollar: UP at $1.2189 from $1.2182

Dollar/yen: DOWN at 149.75 yen from 149.82 yen

Euro/pound: DOWN at 86.78 pence from 86.81 pence

New York - Dow: FLAT at 33,997.65 points (close)

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Artificial Intelligence Analysis

Summary:

This trade news article reports on the market reaction to the potential for a regional war in the Middle East after a hospital explosion in Gaza blamed on Israel. Asian markets mostly fell, while oil prices rallied, and there were concerns that a wider war was becoming inevitable due to increased fighting between Israeli troops and Tehran-backed Hezbollah on the Lebanon border.

Economic Implications:

The immediate economic implication is a decline in Asian markets, as well as declines in the London, Paris, and Frankfurt markets. Additionally, there is a potential for long-term economic damage in the form of higher oil prices, which could reach $150 a barrel in the event of a wider war. This would have a negative effect on Chinas growth and cause equities to struggle. Environmental Implications:

The environmental implications of a regional war are difficult to predict, but could be catastrophic. It is likely there would be increased pollution from military operations and potentially from infrastructure damage. Safety Implications:

The safety implications of a regional war would be devastating, with numerous casualties both in terms of military and civilian lives. Geopolitical and Societal Impacts:

The geopolitical and societal impacts of a regional war would be significant. The conflict could spread to involve other countries in the region, and could have a destabilizing effect on the global economy. The cultural and political contexts would be complicated, as the conflict involves multiple sides with different religious and political backgrounds.

Summary

and Implications:

This trade news article reports on the market reaction to the potential for a regional war in the Middle East after a hospital explosion in Gaza blamed on Israel. Asian markets mostly fell, while oil prices rallied, and there were concerns that a wider war was becoming inevitable due to increased fighting between Israeli troops and Tehran-backed Hezbollah on the Lebanon border. The immediate economic implication is a decline in Asian markets, as well as declines in the London, Paris, and Frankfurt markets. Additionally, there is a potential for long-term economic damage in the form of higher oil prices, which could reach $150 a barrel in the event of a wider war. This would have a negative effect on Chinas growth and cause equities to struggle. The environmental, safety, and geopolitical and societal impacts of a regional war could be catastrophic.

Investigative Questions:

-What is the likelihood of a regional war breaking out in the Middle East? -What would be the direct and indirect economic, environmental, and safety consequences of a regional war? -What diplomatic efforts have been made to prevent a regional war in the Middle East? -What measures can be taken to de-escalate the conflict and prevent a wider war?

Comparison to Star Trek:

The situation in the Middle East could be compared to the episode Balance of Terror from the original Star Trek series. In this episode, a Romulan warbird is attacking Federation outposts near the Romulan Neutral Zone, and the Enterprise is tasked with finding and destroying it before it can cause further destruction. Like the situation in the Middle East, the conflict in the episode had the potential to escalate into a larger war, and diplomatic efforts were made to prevent it.

This AI report is generated by a sophisticated prompt to a ChatGPT API. Our editors clean text for presentation, but preserve AI thought for our collective observation. Please comment and ask questions about AI use by Spacedaily. We appreciate your support and contribution to better trade news.

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