Israel has declared a state of war after Iranian-backed Hamas terrorists launched an attack on the Jewish state which the group said took two years of planning. In response to the assault, which caught Israel by surprise, Gaza has been under intense fire by Israeli airstrikes. The US Navy is also stationed nearby to dissuade others from joining the conflict.

Equity markets have remained surprisingly steady despite the conflict and despite concerns the US may become involved given their uneasy relationship with Iran. The S&P 500 index closed the week +0.45% higher, taking note of the Consumer Price Index data released last week that saw headline inflation stay at 3.7%, whilst core inflation (excluding food and energy) dropped to 4.1%, 20 basis points lower than the August reading.  Treasury yields edged higher given their safe-haven characteristics but lost some of that move as the inflation data was published.

Brent crude oil was up 7.5% on the week, whilst Golf is 4.9% higher. On Thursday, the US and Qatar agreed to suspend the scheduled release to Iran of $6 billion in oil money that had been impounded due to sanctions and US Treasury Secretary Janet Yellen warned Iran that nothing is off the table regarding any new sanctions.

Elsewhere, China’s largest private property developer Country Garden warned it could default on its international debt after sales dropped sharply. The Shanghai Composite index closed the week modestly lower.

The UK’s FTSE 100 made a +1.4% gain, in stark contrast to the more domestic FTSE 250 which lost -1.57% over the course of the week. A weaker Sterling, particularly against the safe haven US Dollar this week, contributed to stronger overseas revenue translation for the international large-cap stocks. European markets were modestly higher with the MSCI Europe ex UK index up +0.91%.

Week Ahead

Source: Refinitiv Workspace, 16/10/23

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