The conflict between Israelis and Palestinians has been going on for at least 70 years and gained a chapter this Saturday. With regard to the short-term effects on assets, economists expect oil, which has been falling for months, to rise
The conflict between Israelis and Palestinians has been going on for at least 70 years and took on a new chapter on Saturday (7). Militants from the extremist Hamas faction, which governs the Gaza Strip, invaded southern Israel by land, air and water, launched missiles, killed hundreds of civilians and soldiers and took hostages. Other extremist factions, such as Islamic Jihad and the Popular Front for the Liberation of Palestine, joined the offensive.
The action against Israel was the biggest in years, dubbed the Israeli “9/11”. The attack was launched during the Jewish holiday of Simchat Torah and one day after the 50th anniversary of the Yom Kippur War between Israel and Arab countries. The action seems to have taken Israel’s armed forces by surprise, pointing to a failure on the part of the country’s intelligence services.
In response, Israel’s Prime Minister Binyamin Netanyahu declared a state of war and ordered the country’s military forces to counterattack by bombing the Gaza Strip. “We are at war. This is not a simple operation,” he said. “Hamas will pay an unprecedented price,” he said. So far, hundreds have been killed and thousands wounded on both sides.
What is Hamas and the Gaza Strip?
Hamas is an extremist, Islamist and Palestinian faction that governs the Gaza Strip, a region of Israel with decades of historical tensions. The group’s founding charter preaches the destruction of Israel, created in 1948 as a “Jewish and democratic state”, and the establishment of an Islamic state in Palestine.
Since the 1990s, Hamas has carried out dozens of terrorist attacks in Israel. The most recent conflict between the extremist faction and the country was a war that lasted 11 days in 2021.
Most of the Gaza Strip’s 2 million inhabitants are refugees who fled the villages located where Israel is today, in the midst of the conflict following the Jewish state’s declaration of independence in 1948.
The region was occupied militarily by Israel in 1967, but in 2007 Hamas began to rule the territory and Israel blockaded the Gaza Strip. The population suffers from a lack of water, food and electricity and is prevented from leaving the region.
How does the war impact the markets?
It is still too early to determine the size of the conflict between Israel and Hamas, but analysts expect it to be long and for the focus to shift from Ukraine to the Middle East. The expectation is that the United States will help Israel and that Iran and Russia will be held responsible.
As for the short-term effects on assets, economists predict that the barrel of oil, which has been falling for months, will rise. “This war was the ‘excuse’ we needed for oil to rise and, if it does, the US central bank’s entire effort to tame inflation will be in jeopardy,” says economist André Perfeito.
With oil prices on the rise, economists predict that investors will continue to put pressure on US interest rates, which could have an effect on other asset classes.
“I don’t think that the conflict will spread to the region involving other countries, but just the possibility of this happening already shows that agents’ preference for liquidity should rise, causing risk-free assets to rise, as is the case with the dollar,” says the economist.
However, he adds that, looking to the medium term, the situation is not necessarily bad for Brazil. “Depending on how Itamaraty handles the international crisis, Brazil could remain ‘far enough away’ from all this ‘noise’. So, in relative terms, the country could benefit,” says Perfeito.