Middle East Conflict - The Effects On The Stock Market.

After Friday's hot September U.S. employment data upped the stakes for inflation statistics later in the week, the Middle East conflict on Monday helped oil and safe-haven government bonds while hurting international markets and Israeli assets.

Israeli government bonds decreased in value, with the 2120 "Hundred Year" bond falling to a record low of 5.3 cents on the dollar. The central bank of the nation made the offer to sell up to $30 billion of foreign currency in order to preserve stability after the shekel fell to its lowest level against the dollar since 2016 at 3.9880.

The central bank also stated that it would provide the markets with liquidity if required, which assisted in the shekel's ability to limit losses.

In revenge for one of the worst attacks in modern history, in which the Islamist organisation Hamas murdered 700 Israelis and kidnapped dozens more, Israel bombarded the Palestinian enclave of Gaza on Sunday, killing hundreds of civilians.

After recent aggressive selling, the cautious atmosphere proved a salve for sovereign bonds, as 10-year Treasury futures increased noticeably by 13 ticks. Due to a U.S. holiday, the cash Treasury market was closed on Monday.

Germany's 10-year Bund yield decreased by about 5 basis points to 2.84%, pulling down from a 12-year peak reached last week.

Additionally in demand, gold increased by around 1% to $1,850 per ounce.

Furthermore…

The Middle East war occurs at a time when markets are uneasy and global bond rates are at multi-year highs.

The bond sell-off has been fuelled by a confluence of factors including investors' acceptance that central banks would maintain high-interest rates for a considerable amount of time, rising oil prices, a glut of corporate and government bonds, and asset managers' capitulation who had been long government bonds.

The disappointing U.S. employment data on Friday further strengthened the argument for higher rates going forward. Investor focus is now shifting to Thursday's consumer price data for September, which might cast doubt on the Federal Reserve's intention to hold off from raising rates further.

Both the headline and core measures are expected to increase by 0.3% on average, which could result in a slight slowdown in inflation's annual rate.

This week's deadline for Federal Reserve meeting minutes should make it possible to determine how committed members are to maintaining high rates or possibly raising them once more.

With almost 75 basis points of rate reductions priced in for 2024, Fed fund futures indicate an 86% likelihood that the Fed will maintain rates in November.

(Sources: investing.com, reuters.com)