Oil prices surged while global equity markets faced uncertainty following Hamas’ unexpected attack on Israel, prompting Israel to declare war on Gaza and raising concerns of an escalating conflict in the oil-rich Middle East.

Benchmark oil contracts, including Brent and WTI, initially jumped more than five per cent in Asian trading before moderating.

This crisis had a ripple effect on global markets. While energy companies benefited from higher oil prices, overall equity markets experienced shockwaves. The U.S. dollar, Japanese yen, Swiss franc, and gold gained as they were sought after as safe-haven investments during geopolitical turmoil.

Craig Erlam, a senior market analyst at OANDA, noted that the surprise attack heightened fears of instability in the already tight Middle East oil market. The situation raised concerns about potential disruptions in oil flows.

Analyst Fawad Razaqzada from Stone X pointed out that investors were in “risk-off” mode due to worries that Israel’s retaliation could escalate tensions in the region, including with Iran.

While Wall Street and major European stock markets remained relatively stable, there were slight dips in some indices. London’s equities saw modest gains, primarily supported by oil giants BP and Shell. Meanwhile, Paris and Frankfurt experienced slight declines.

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The Middle East crisis exacerbated concerns about oil supplies, coinciding with existing worries about reduced output from Saudi Arabia and Russia. Additionally, the situation renewed fears of inflation, with energy costs being a significant factor driving price increases.

The conflict’s impact extended beyond financial markets, with over 1,200 casualties and the potential for the situation to draw in the United States and Iran. Israel imposed a “complete siege” on the Gaza Strip, and there were warnings of a third party entering the war. The Bank of Israel took measures to stabilise the shekel currency, which had depreciated significantly against the dollar.