Israel-Hamas War

We are heartbroken about the ongoing situation between Israel and Hamas and certainly hope for peace as quickly as possible.  Below is a summary of the ongoing conflict and our take on relevant portfolio observations.  As always, we are vigilantly monitoring the evolving situation.

On Saturday, October 7th, Israel was struck by a surprise attack from Hamas. As of October 10th, the estimated death toll stands at over 1,000 Israelis from Saturday’s attack and over 900 for Hamas from Israeli retaliation. [1] With a ground invasion imminent, these death tolls are expected to rise by at least an order of magnitude. This war coincides with the 50th anniversary of the 1973 Yom Kippur War, which lasted 19 days and began as a surprise attack by Egypt and Syria. That war resulted in an estimated 2,800 casualties in Israel and around 15,000 among the combined Egyptian and Syrian forces. [2]

In the short term, the markets have responded to the attack with increased oil prices, the devaluation of the Israeli Shekel against the US Dollar, higher values for precious metals, and increased values for defense stocks. In the weeks prior, there was hope that Israel and Saudi Arabia would normalize relations, potentially leading to increased oil production by Saudi Arabia. However, with this new attack, the probability of a normalization deal with Saudi Arabia has decreased, as the deal hinged on concessions for Palestinians. [3] This caused oil prices to surge when the markets opened on Monday, October 9th. The devaluation of the Shekel against the US Dollar is primarily due to concerns about Israel’s economy. The rise in the value of precious metals can be attributed to a hedge against uncertainty. Finally, the increase in the value of defense stocks is a response to the cost of the conflict.

Ultimately, the longer this war lasts, the more likely these short-term market reactions will solidify into long-term trends. We are closely monitoring the situation to see how it develops, but as it currently stands, with the war limited to Israel and Hamas with only minor skirmishes to the North with Hezbollah and West with Syria, we do not believe the war will have an outsized impact on financial markets. [4][5]

Sources:

• Israeli troops mass on Gaza border as death toll from Hamas attack passes 1,000 | Gaza | The Guardian
• The Yom Kippur War of 1973 (thoughtco.com)
• Netanyahu says Israel nears normalization deal with Saudi Arabia but refuses to outline concessions to Palestinians | CNN
• Israel bombs south Lebanon after Hezbollah rocket fire | Reuters
• Clashes Along Israel’s Borders With Syria and Lebanon Raise Fears of Another Front – The New York Times (nytimes.com)

Bridge Advisory LLC Disclosures

Bridge Advisory, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Investment Advisory Services offered through Bridge Advisory, LLC. Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type. Bridge Advisory, LLC. does not warrant its completeness or accuracy; opinions and estimates constitute our judgment as of this date and are subject to change without notice. This newsletter expresses the views of the authors as of the date indicated and such views are subject to change without notice.