War Woes

The terrorist attack in Israel rekindled the flames of a generational conflict and gave the markets something new to chew on. The only real predictable reaction is that crude oil would be higher, and it was. November crude oil futures gapped higher Sunday night and coming into Friday morning had gained $4/brl on the week. The stock indices and bond markets presented a more peaceful trading week, coming off their lows from last week initially and trading sideways from there. There was volatility, but not as much as one might have expected considering the newest Consumer Price Index (CPI) numbers were released as well. CPI rose 0.4 percent last month, which is below the 0.6-percent gain in August but above the 0.3-percent pace economists expected.

Lines have already been drawn in the conflict between Ukraine and Russia. Fortunately, the rest of the world has enough perspective to respect countering positions and actions that move out of the black and white into the gray area. NATO-imposed sanctions against Russia have been circumvented by opportunistic nations in Asia and needy nations in Africa, while NATO nations have supported Ukraine financially and militarily without getting involved in a direct conflict.

The new lines drawn over this latest conflict in Israel will look a lot like the old ones, but they will provide new opportunities for those looking to take advantage. Neighboring Middle Eastern nations looking to settle old scores that will never be settled, and trade partners looking to get cozy with those same oil-producing Middle East nations will both be on the prowl. Politics, same as it ever was. The difference this go-around is the power players that are economically connected but differ politically have already had their relationships strained in recent years. The worry is that it may not take as much effort to tip over the bucket of chaos and have it spread out of control. Fortunately, the market doesn’t seem to be pricing in such a scenario after the initial attack and the response from Israel. Any country who stands to gain from taking advantage of the situation also has a lot to lose should they go too far. Unfortunately, Hamas, a leading faction of Palestinians in the Gaza Strip, have nothing to lose as displayed by their actions. While one would hope that could change for the better in time, the main concern at the moment is keeping that attitude from spreading.

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