Surprise coordinated attacks on Israel over the weekend by Hamas have drawn global condemnation and have left the world shocked and saddened by the tragic loss of life and the scale of human suffering in the region. With Israel declaring war in response to the savage assault, questions remain about the broader effects of the conflict. In our view, the direct impact of the attacks will likely have minimal long-term impact on stock and bond markets. Despite the uptick in oil and gas prices, neither Israel nor Gaza are large producers or consumers of either.
The latest estimates from the US Energy Information Administration show that Israel is responsible for less than 1/4 of 1% of global consumption or production. We believe the continuing conflict will be largely one-sided and lacking the expansive scope of the Russia-Ukraine war given Israel’s larger and more advanced defense forces, as well as the limited breadth of territory being targeted. Of course, peacetime consumption might not reflect wartime consumption, but comparing the current war with Israel’s conflict with Hezbollah in 2006 and the 2014 Gaza War, we see little evidence of drastic consumption spikes.