What’s Benjamin Netanyahu’s next move? Israel’s prime minister, center, is under intense international pressure not to retaliate after Iran’s missile and drone attack.Credit…Agence France-Presse, via Israeli Prime Minister Office
An uneasy calm
Investors are breathing a sigh of relief on Monday. Global stocks are in the green and oil prices have retreated from last week’s gains after Iran’s unprecedented drone and missile attack on Israel was mostly neutralized in the skies. But the calm could be short lived, as world leaders and markets focus on Israel’s response.
Military clashes don’t always sink the markets, as was the case when Hamas attacked Israel in October and Israel retaliated. But many on Wall Street fear the economic impact from hostilities in the Middle East and in Ukraine. “We may be entering one of the most treacherous geopolitical eras since World War II,” Jamie Dimon, JPMorgan Chase’s C.E.O., warned last week.
Benjamin Netanyahu is facing intense international pressure not to retaliate. The United States, the Group of 7 nations and Arab states are urging restraint. “Take the win,” President Biden reportedly told Israel’s embattled prime minister after the attack was rebuffed with American help. Iran has signaled that the attack was a one-and-done, but Israel’s war cabinet hasn’t indicated its next move. Meanwhile, the government’s hawkish wing is calling for a quick and aggressive response.
“A meaningful Israeli retaliation in the next 48 hours does indeed remain on the table,” Helima Croft, the head of global commodity strategy at RBC Capital Markets and a former C.I.A. analyst, wrote in an investor note last night.
Escalation could roil the oil market. Brent crude, the global benchmark, has risen roughly 18 percent this year, accelerating in recent weeks as tensions in the Middle East have heated up. Some on Wall Street see oil topping $100 per barrel, which could have the cascading effect of reigniting inflation, scrambling the Fed’s timeline for cutting interest rates, and hurting Biden at the polls.
But on Monday, there’s calm. European stocks and U.S. futures are up slightly, with shares in defense companies, including Saab and Leonardo, jumping after markets opened, and Lockheed Martin gaining in premarket trading. The aviation sector is a wild card. Much of the airspace over the Middle East was reopened on Sunday, but flight cancellations abound.
