Hamas attack will rattle global markets and won’t end quickly or well

The Hamas attack has been described as Israel’s 9/11 and no-one can say how it is going to play out, except that for the global economy and investment markets it won’t end quickly or well.

A young Palestinian walks through rubble in a heavily bombarded neighbourhood following Israeli airstrikes on Gaza City's Shati refugee camp early on October 9, 2023. Picture: MAHMUD HAMS / AFP

Just when global investment markets looked like settling into a sort of uneasy equilibrium – certainly uneasy, but something of an equilibrium nevertheless - along came the ‘Black Swan event’ of the Hamas attack.

It has best been described as Israel’s 9/11. It certainly will be in terms of its spreading and deepening global economic and investment impact.

For just as we are still living with the impacts of 9/11 – and in particular, the impacts of the global policy responses: the zero interest rates, the money printing, the huge budget deficits; all of which got a further burst after the GFC in 2008, and then again with Covid; so we will with also the ripples if not the tsunamis from last weekend.

What was happening, what was developing, overnight Friday, ahead of it all was both interesting and instructive.

It all turned on the latest US jobs numbers, with a supporting act from what was happening in the oil and broader energy and resources markets.

Ahead of the open on Wall St, the headline jobs number came out way higher than all predictions. It sent Dow futures plunging; and this carried into the actual early trading. Bond yields kicked up.

TOPSHOT - People attend a vigil for Israeli victims at the Stephen Wise Temple, in Los Angeles, California on October 8, 2023, after the Palestinian militant group Hamas launched an attack on Israel. Picture: Robyn Beck / AFP

The Fed would surely go back to hiking.

The detail in the numbers told a different more sobering story. No, the US economy was soft. The Fed would not have to hike.

Not quite a Goldilocks scenario, but the best of a range of messy to seriously nasty futures.

The Dow finished firmly up. Bond yields subsided.

Something similar was happening in the oil market.

Mid-week, people were lining up to forecast oil going above $US100; but the oil price had already started to soften going into the jobs numbers, and softened further after they were digested, on weaker US and global growth expectations.

Then we got the savage Hamas attack; and all that – both the underlying economic developments and the market reactions – was instantly rendered ‘no longer operative’.

Monday afternoon, in downunder trading, Dow futures pointed to the Dow reversing all of – at least – Friday’s gain. Global oil prices kicked – perhaps surprisingly modestly – higher.

No-one, and I mean no-one can say how this is going to play out, Except that it will be bad; and there will be, wide, deep and long-impacting, consequences.

Setting aside the geo-political and military consequences, we know now after 9/11 and the GFC, that the financial and economic policy impacts will be profound and long-lasting, with all sorts of unexpected and unpredictable turns and out-turns.

And then add on, by the bye, Covid and what governments and central banks did.

I have to say, I was more than a tad ‘impressed’ by the sanguine trading on our local bourse through Monday.

Yes, the buying of energy and gold stocks was inevitable; but for the market overall to finish in the black was, well, let’s just say, surprising.

Setting aside the likely massive human suffering – and the complete unknown of where this might go – just so far as the global economy and investment markets are concerned this is not going to end either quickly or well.