Crude oil held above $90 a barrel, equities slid and the safe-haven dollar was firm on Monday amid heightened anxiety over escalating violence in Gaza and the prospect the conflict could spread beyond Israel and Hamas into the wider region.
Israel’s shekel sank to a more than eight-year low after the country’s prime minister, Benjamin Netanyahu, vowed to “demolish Hamas” in retaliation for the rampage on Oct. 7 that killed 1,300 people in the worst attack on civilians in Israel’s history.
U.S. Secretary of State Antony Blinken is visiting the region, seeking to prevent further escalation. Netanyahu agreed to lift a blockade of water supplies to parts of southern Gaza after speaking with U.S. President Joe Biden.
Brent crude futures reached a recent high of $91.20 on Monday before trading little changed just below $91, following Friday’s 5.7% surge.
Japan’s Nikkei share average (.N225) fell as much as 2%, while Hong Kong’s Hang Seng (.HSI) slipped 0.43% and mainland blue chips (.CSI300) dropped 0.69%.
Australia’s S&P/ASX 200 index (.AXJO) lost 0.35%, New Zealand’s equity benchmark (.NZ50) slid about 1%.
On Friday, the pan-European STOXX 600 index (.STOXX) lost nearly 1% and New York’s S&P 500 (.SPX) declined 0.5%, although U.S. stock futures pointed 0.2% higher on Monday.
“The situation is dynamic and it’s too early to say if the hedges placed on Friday are unwarranted, but there have been pockets of positive news flow,” Chris Weston, head of research at Pepperstone, wrote in a note, citing the resumption of water supplies as one example.
“Risk and energy markets will look for headlines and actions from Iranian officials who have stated they have a duty to come to the aid of the Palestinians.”
Currencies overall retraced some of their moves from the end of the week, with the U.S. dollar index easing slightly to 106.51 from as high as 106.79 on Friday.
The euro rose 0.14% to $1.05255 while the yen was little changed at 149.445 per dollar.
Israel’s shekel weakened to 3.9900 per dollar early in the day for the first time since April 2015, although it has since rebounded about 0.3% to 3.9650.
Benchmark 10-year U.S. Treasury yields edged up to 4.6581%, following a more than 8 basis point decline on Friday amid demand for the safety of bonds.
Gold pared about $12 of Friday’s $63 gain, retreating 0.6% to $1,919.29 per ounce.
“Ultimately, gold and oil prices are the most sensitive expressions of the (Gaza) conflict’s risks,” Kyle Rodda, senior financial market analyst at Capital.com, wrote in a note.
However, “identifying the potential flashpoints and gaming-out scenarios is highly challenging,” Rodda said.
