Tensions in the Mideast are as high as they’ve been in recent memory after Saturday’s invasion of Israel and the massacre of its citizens by the terrorist group Hamas. The deadliest attack on Israel in a half-century sparked volatility in financial markets and could have ripple effects for investors around the world depending on what happens in the coming days and weeks. The fighting caused an expected rise in U.S. and global oil prices. West Texas Intermediate crude, the American benchmark, jumped more than 4% on Monday. Brent crude, the international standard, rose by a similar amount. The Dow Jones Industrial Average , the S & P 500 and the Nasdaq on Monday reversed steep earlier declines and traded higher. Reaction in the U.S. bond market, which was closed Monday for Columbus Day, will have to wait another day. If stocks had been forced to contend with a higher 10-year Treasury yield Monday, the market would have been under more pressure, Jim Cramer said earlier in the day . The 10-year yield Friday hit a 16-year high before easing by the end of the session. The market does not know how to factor in what’s happening in the Mideast, Jim Cramer said Monday afternoon. Russia’s war against Ukraine, which started in February 2022 and is still ongoing, ushered in more inflation and led to the Federal Reserve’s aggressive monetary tightening to stop rising prices. Jim said the Hamas-Israeli war might actually “stay the Fed’s hand.” Before making a judgment, Jim added that he wanted to see this week’s inflation data. In the broad context of the Mideast, efforts to craft a Saudi-Israel normalization deal, being pushed by the United States, are on hold at best, with Israel’s entrance into Gaza with ground forces viewed as inevitable. Israel, which has been amassing tens of thousands of troops near the strip, has bombed the area and cut off electricity, fuel, food and other supplies in retaliation. It remains to be seen who else will be drawn into the conflict. The terrorist group Hezbollah is on the Northern border and the common link between Hamas and Hezbollah is Iran, a key power in the Mideast and a top producer of oil globally. Concern about wider fallout from the Hamas-Israeli conflict is likely to put a floor under oil prices for the time being. That’s a positive for U.S. producers as it means healthy free cash flow from steady pricing for dividends and buybacks. The geopolitical upheaval, however, is less favorable for stocks outside of energy, which represents a major input cost for most companies and a drag on the consumer whose spending fuels nearly two-thirds of the American economy. Higher energy prices are inflationary, but the Fed puts less weight on them. The Fed likes to measure inflation by using the core personal consumption expenditures (PCE) price index, which strips out the impact of food and energy. However, we have to consider that if energy remains high, or goes higher, companies will once again consider price actions to…
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