OIL PRICES SOAR, GOLD ALSO JUMPS FOLLOWING ESCALATION BETWEEN HAMAS AND ISRAEL

Mon 09 October 2023:

Oil prices soared more than four percent today, sparking concerns about possible supply shocks from the crude-rich region. Any sustained rally in oil prices would act as a tax on consumers and add to global inflationary pressures.

Meanwhile, gold prices climbed more than 1 percent as the risk of a wider war prompted a rush to safe-haven investments like bullion.

And as we’ve reported before, several international air carriers have suspended flight services with Tel Aviv, saying they are waiting for conditions to improve before resuming.

Brent crude, the international benchmark, climbed by $2.25 a barrel to $86.83, while US prices also rose.

Israel and Palestinian territories are not oil producers but the Middle Eastern region accounts for almost a third of global supply.

Hamas’s assault on Israel was the biggest escalation between the two sides for decades.

Energy analyst Saul Kavonic said that global oil prices have risen “due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia”.

On Monday morning, the price of West Texas Intermediate crude, the US benchmark, was up $2.50 a barrel at $85.30.

“If the conflict envelops Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply is at risk,” Kavonic added.

Uncertainty over how events could develop in the coming days may also drive investments into US Treasury bonds and the dollar, which investors traditionally buy at times of crisis, said James Cheo from HSBC bank.

On Monday, Israel’s central bank said it would sell up to $30bn of foreign currency in a bid to calm markets and support the country’s own currency, the shekel, which has fallen sharply.

ISRAELI SHEKEL FALLS TO ALMOST 8-YEAR LOW

“At this stage, there is a bit of nervousness. [Investors] want to see a little more clarity, particularly on economic data and on developments associated with geopolitical uncertainty,” added Cheo.

On reasons that has fueled gold and silver prices today, Anuj Gupta, Head — Commodity & Currency at HDFC Securities said, “Gold and silver prices are rising today due to uncertainity after the geo-political tension in Middle East.

After the escalation between Hamas and Israel, gold has gained attention of investors as other assets are expected to feel the sell off heat. In such a scenario, people are expected to shift their money from other assets like equities, mutual funds, bonds, etc. to bullions. So, its war news that is going to work as major trigger for the yellow and white metal prices in near term.”

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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