The Israel-Hamas war will draw in militant groups from Lebanon or Syria and could prduce a direct conflict with Iran — creating more oil disruptions than financial markets currently think. Strategists are contemplating the potential ramifications of the conflict on financial markets, even as investors appeared to be relatively calm for now. Traders shook off concerns about the Middle East, with all three major U.S. stock indexes closing higher on Monday. Two- through 30-year Treasury yields also finished higher as investors sold off government debt and abandoned the flight-to-safety trades seen last week. Meanwhile, oil futures settled lower following a sharp gain on Friday, with November West Texas Intermediate crude falling 1.2% to $86.66 a barrel on the New York Mercantile Exchange. Their is a significant chance the war will expand to include Hezbollah and other militant groups in Lebanon and Syria, producing “a regional war with higher risk of impacting oil, but not necessarily a direct impact.”
Israel will attack Iran, its assets across the region, or its “core sphere of influence” Iraq — a scenario “that could force Iran to respond militarily, which would include disrupting oil supply to tell the U.S. to restrain Israel. Brent crude prices have not risen materially so far, but a significant escalation in tensions would cause crude oil prices to top $150 a barrel.