NEW YORK, Oct 28 (Reuters) – Investors will be watching for signs over the weekend whether the Middle East conflict will escalate. That could add to the volatility in what was already expected to be a busy week of Federal Reserve policy statements and Apple announcements. result.
On Friday, Israeli air force and ground forces stepped up operations in the Gaza Strip, nearly three weeks after a deadly attack by the Islamist movement Hamas.
Investors have grown increasingly concerned about the escalation of the conflict in recent days after Israel attacked targets in the Gaza Strip and Hamas supporters in Lebanon and Syria, while the United States sent more military assets to the Middle East. There is.
“The situation in Israel… is causing a great deal of anxiety,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
On Friday, Brent futures rose 2.9% to $90.48 a barrel on concerns that the conflict could disrupt oil supplies. Physical gold, a popular safe-haven asset for nervous investors, rose above $2,000 for the first time since mid-May.
Analysts at Capital Economics said in a note Friday that oil market reaction to the conflict has so far been “modest.”
“However, any signs that other countries in the region are increasing their involvement in the conflict would cause oil prices to soar,” they wrote.
Peter Cardillo, chief market economist at Spartan Capital Securities, said if the conflict escalates and the U.S. increases war-related spending and the budget deficit widens, U.S. bond yields could rise above the 16-year high they have already reached. He said there was a possibility of an increase.
Some investors also expect the escalation of the conflict could lead to safe-haven purchases of U.S. Treasuries. This could ease the surge in yields, which are inversely proportional to prices, which in turn could ease pressure on stocks and other assets.
The S&P 500 index is down more than 10% since reaching its 2023 high in late July, but is up more than 7% since the beginning of the year.
“To date, U.S. Treasuries have not functioned as a conventional safe-haven asset,” UBS Global Wealth Management said in a note on Friday. “However, escalating conflict is likely to distract attention from monetary policy concerns and increase demand for U.S. Treasuries as a safe haven asset.”
The CBOE Volatility Index (.VIX) rose in response to the conflict, rising on Friday and nearing a seven-month high.
The US Federal Reserve is scheduled to release its latest monetary policy statement on Wednesday, while Apple’s quarterly results highlight another busy week for corporate reporting.
Report by Lewis Krauskopf. Additional reporting by David Randall. Editing: Ira Iosebashvili, David Gregorio
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