Global markets stabilize as the US tries to contain the war in the Middle East.

Oct 16
As the Asian trading week got underway and the US and its allies attempted to manage the conflict between Israel and Hamas, demand for safe-haven assets decreased.

However, after Friday's increase in crude oil, gold, and the Swiss franc versus the euro, investors were still uneasy about the possibility of sudden price changes. Early trade saw the US dollar and Treasury bonds, a typical haven during the unrest, fall as risk-sensitive currencies such as the Australian dollar climbed.
The market for U.S. government bonds has had a difficult week, with bonds experiencing their greatest gains and losses in years as demand was offset by unsettling inflation statistics and subpar auction results. The TA-35, Israel's primary stock index, started to drop once more on Sunday.

According to Klaus Baader, chief economist at Societe Generale, the Middle East war "looks set to dominate markets."

According to Bloomberg Economics, a more extensive Middle East conflict runs the risk of causing a global economic downturn. Investor worries over whether the Federal Reserve is done raising interest rates and how a rogue US Congress would avert a government shutdown have grown in number as a result of this.

According to Ed Al-Husseini, global rates strategist at Columbia Threadneedle, "the worsening macroeconomic environment, coupled with sharp swings in interest rates, has set the stage for increased global volatility."

The Swiss franc reached its highest level versus the euro in more than a year last week, and S&P 500 stock volatility increased as a result, even if broader market volatility indicators remained low.

Since data collection by Bloomberg began in 2005, a measure of anticipated price changes in the largest Treasury ETF in the world has outpaced the largest stock fund this month by a significant margin.

For investors, the Middle East war continues to be the biggest surprise. The market will be waiting with bated breath, according to Jane Foley, head of foreign exchange strategy at Rabobank. "We're all on edge, wondering which direction things will go, but until we start to worry about oil supplies, the market will be waiting with bated breath," she said.

Created with