Historical events have taken place during the weekend. The decades-long Israeli-Palestinian conflict escalated after initial Hamas "Al-Aqsa Storm" operations, with Israel imposing a total blockade on Gaza, leading to essential shortages. Israel launched severe airstrikes across Gaza, killing over 700, while Gaza militants killed 900 Israelis. Violence spread across the occupied West Bank and Lebanon. International protests erupted, with the UN Security Council unable to find consensus on a statement. The conflict claimed migrant workers too, with Thailand confirming 18 citizens were killed, The prospect of de-escalation remained distant despite rising casualties on both sides.

EQUITY

The Dow and S&P 500 closed higher Monday as stocks rallied on dovish Fed comments while investors looked ahead to the start of earnings season. Airline stocks like Delta, United, and American dropped after suspending flights to Israel amid conflict, while defence stocks like Northrop Grumman and L3 Harris surged on expectations of higher defence spending from escalating Middle East tensions.

GOLD

Gold prices turned around and ticked higher on Tuesday as increased conflict and tensions in the Middle East led to safe-haven demand and boosted gold as an investment. The rally in gold prices came despite rising bond yields, which would typically weigh on non-interest-bearing gold. Looking ahead, further escalation of geopolitical tensions could push gold prices towards $1900 an ounce if the situation worsens and fear becomes widespread.

OIL

Oil prices fell slightly on Tuesday after surging over 4% on Monday, as the conflict between Israel and Hamas raised concerns about potential supply disruptions in the Middle East. However, the oil terminals in Israel have been shut down due to the fighting, and the conflict derails normalising ties as Saudi Arabia denounces efforts, which may have led to increased Saudi oil production. Meanwhile, progress in US-Venezuela talks could allow more Venezuelan oil exports if sanctions are eased.

CURRENCY

The dollar is in demand as a safe haven amid Middle East tensions, driving the Israeli shekel sharply lower despite the Bank of Israel's $30 billion intervention as Treasury yields fell. The euro declined as it is under pressure from the risk-off environment and disappointing European data. Knot maintained the ECB's steady rate outlook despite the euro's slide, while traders are divided on the common currency's direction given the uncertainty.