After years of geopolitical conflict in Israel and Gaza is seen as having the potential to disrupt the direction of the economy and financial markets. In this article, we will provide insight into the potential implications of geopolitical issues on the market economy and politics due to the military conflict between Israel and Hamas.
Israel-Gaza Conflict & Its Implications
Undeniably, geopolitical factors have had a significant impact on the global economy and financial markets in recent years.
The following is a list of geopolitical events that have put pressure on world markets and economies:
1. US-China tensions
2. Russian-Ukrainian war
3. Increased Chinese military aggression in Taiwan
4. Military coups in Africa
5. Nagorno-Karabakh War Conflict in Armenia and Azerbaijan
6. The issue of terrorist attacks in Kosovo and Serbia
The following geopolitical events have contributed to the adverse global geopolitical environment and pose risks to the economic outlook.
The recent conflict in Israel is seen to further cloud the world's geopolitical situation.
Israeli Prime Minister Netanyahu's declaration of war with Hamas has shown that this conflict will continue for much longer.
In addition, the proxy dispute between Israel and Iran is intensifying, Iran is said to have supplied military resources to Hamas. This may potentially lead to the military intervention of Saudi Arabia and Qatar.
Thus, this factor is seen to have shaped the global geopolitical climate to a level that is very worrying for the world economy and market.
The more extensive military conflict in the Middle East is able to result in reduced oil supply and at the same time increase the price of crude oil.
As has been proven during the initial phase of the Russia-Ukraine conflict, the increase in the price of oil and natural gas can have a serious impact on several economies around the world, especially the G10 countries and the "emerging market" countries that contribute greatly to global growth, such as China and India.
In addition, "safe-heaven" assets such as Gold, the United States Dollar, United States Treasury Bonds and the Japanese Yen are likely to strengthen and have potential.
To identify the impact and implications on the world market in the near future, we need rhetorical evidence that shows whether Iran is the mastermind in the attack on Israel.
Continued conflict between Israel and Iran will significantly worsen the geopolitical landscape and will have a severe economic impact on the entire world through higher oil prices and lower sentiment.
The following is the impact of geopolitical pressure on the world's financial markets in general:
Risk Perception: Geopolitical events can increase uncertainty and risk in financial markets. Events such as war, political instability, trade disputes, or acts of terrorism can increase market volatility as investors become more risk averse.
Market Sentiment: Geopolitical news and developments can affect market sentiment. Positive geopolitical news, such as the resolution of a trade dispute or the signing of a peace agreement, can boost investor confidence, while negative news can have the opposite effect.
Currency Exchange Rates: Geopolitical events can affect currency exchange rates. Political stability, economic policy, and international relations affect the strength and stability of a country's currency. The currency market is very sensitive to geopolitical developments.
Commodity Prices: Geopolitical events can disrupt the supply of commodities, such as oil and natural gas. Conflicts in key production areas, trade restrictions, can cause fluctuations in commodity prices, which can affect industries and economies around the world.
Interest Rates: Geopolitical events can influence central bank policy. In response to geopolitical risks, central banks may adjust interest rates to stabilize the economy or reduce inflation. These rate changes can impact bond and equity markets.
Investor Behavior: Geopolitical events often bring changes in investor behavior. During periods of uncertainty, investors may shift their portfolios to hedging assets such as gold, government bonds, or stable currencies (USD, JPY, CHF). This can affect asset prices and market dynamics.
Global Supply Chains: Geopolitical tensions, trade disputes, or conflicts can disrupt global supply chains. Companies that rely on international production and distribution may face challenges that can impact their financial performance and share price.
Geographical Details: Geopolitical events can have a more significant impact on markets within certain regions or countries. For example, a political crisis in a major oil producing country can have a direct and immediate impact on the global oil market.
Regulatory Changes: Geopolitical events can cause changes in trade regulations and policies. These changes can affect the profitability and operations of businesses in various sectors, which then have a market reaction.
Investors and financial institutions constantly monitor geopolitical developments to assess potential risks and opportunities. It is important to note that the impact of geopolitics on financial markets is often complex and varied.
Events may have short-term effects, but their long-term impact can depend on how they occur and the response of governments, central banks, and market participants.
Therefore, investors and financial professionals need to be aware of geopolitical developments and assess their implications for the market.
