Analysts at Danske Bank explain the implications of the Hamas-Israel military conflict on the financial markets.

Key quotes

“On Saturday morning, Hamas launched an attack against Israel by land, air and sea. In response, the Israelian army has started heavy retaliation in Gaza, marking the most severe military conflict in the region since the Yom Kippur War in 1973. Israeli government has warned its citizens to prepare for a long war as their army seeks to destroy Hamas.”

“The key thing to watch is to what extent the Iran-affiliated Hezbollah becomes involved in the conflict since their involvement would raise the risk of a broader war in the Middle East.”

“For now, market impact has been limited. We see little room for oil prices to rise as stagflation concerns are high, and we are more concerned about the gas market.”

“A more severe war would raise market uncertainty, triggering safe haven flows supporting USD, while US real yields could rise on the back of defence spending.”