Impact of Hamas invasion of Israel on U.S. markets

Why the Israel-Hamas War Matters for Investors

While market moves were initially muted, what should be a concern is the potential for the war to escalate

By James Mackintosh, The Wall Street Journal, Oct. 9, 2023

…When it comes to the bottom line, even disaster for millions of people doesn’t much matter, and moves in both stocks and Treasurys were smaller than after Friday’s jobs report…

What won’t happen is a repeat of the Arab oil embargo that followed the last invasion of Israel half a century ago, as Arab states are now much more friendly to Israel. …

For investors, insuring against a true Iran-Israel conflict is easier than usual. The things to buy — oil stocks, defense stocks and Treasurys — were fairly attractive anyway, as the tight oil market delivered high profits and bond yields hadn’t been so high since 2007… [end quote]

Iran is behind the invasion, using Hamas as a proxy the way they use Al Quaida in Yemen. Iran also finances Hezbollah in Lebanon so there is the danger of an attack from the north.

As heinous as the terrorist invasion of Israel is, it’s only a tempest in a teapot compared with the potential conflict between China and the U.S. if China invades Taiwan. The current war won’t have a major impact on the U.S. markets unless Israel attacks Iran, which is unlikely.



There are several “macro” considerations that impact this latest conflict and its ability to escalate and trigger larger military actions and death.

The Russian ruble is trading under 1 ruble to the US dollar so the Russian economy has nothing left in the tank to support more manufacturing of weapons to support Iran or Syria.

Russia has already curtailed exports of petroleum products, reflecting its inability to maintain its domestic refining infrastructure to serve its internal needs for its economy and its excursion in Ukraine.

The US is already finding its internal stocks of missiles and ammunition depleted from support given to Ukraine. Some experts have estimated it would take US firms 2-3 years to replenish inventory levels to our normal reserve levels. Other western aligned countries seem to be in a similar situation. This means there is VERY little left in the tank to give Israel for any extended offense without jeopardizing support for Ukraine.

One larger concern arising from this attack involves the value of big-dollar weapons systems and operation of a national security state with billions spent on “intelligence” that ultimately fail so catastrophically. By all accounts, Israeli intelligence was completely suprised not only by the timing of the attack but its scope and breadth. Presumably, so was the US. Hamas apparently flipped most of its command and control communication to messengers on motorcycles to keep information off electronic networks. People have to shuttle in and out of Gaza every day through Israeli checkpoints so this made it easy to hide communication in the lowest-tech way possible, in plain sight.

The multi-billion dollar Iron Dome missile defense system works amazingly well, unless the enemy stockpiles weapons for YEARS then unleashes HUNDREDS in minutes. The US is sailing the USS Gerald Ford and support ships off the coast to provide a base for helicopters, etc. but the ultimate value of that $12.8 billion dollar ship is questionable in this event. Hamas didn’t worry that its enemy was allied with someone owning that type of firepower.

On one hand, one might think these limitations imposed by already out-of-control spending on existing military disasters would limit the chance of a rapidly escalating conflict. That might be true with more rational actors but the events over the last two years – or even the last 75 years – make it clear none of the parties involved in any of these pair-wise conflicts are thinking rationally. When people with limited imaginations and more limited morality feel they are existentially threatened and out of options or feel they’ve devised a scheme to apply a long-awaited fatal blow to their enemy, it becomes vastly more difficult to predict next steps.

Meanwhile in the US, in one chamber of Congress, one Senator continues to block military promotions involving positions actively involved with supporting whatever the US chooses to do to back Israel. In another chamber of Congress, paralysis within the majority party seems to be resulting in more extremist candidates being suggested to become Speaker while we have a debt ceiling fire drill looming in another 40 days or so. The replacement of the Speaker will trigger ENORMOUS conflict over the United States’ military support for Ukraine and Israel, magnifying existing divisions that could delay filling that position to delay action on a budget solution.

I suspect this will make bond prices and interest rates VERY difficult to predict. On one hand, if this latest war escalates rapidly, a “flight to security” might boost Treasuries, lowering short term interest rates. On the other hand, the continued failure of the US government to handle basic budgeting responsibilities should be spooking interest rates up, making direction very difficult to forecast. Back around 2010 when the US was only carrying $14.5 trillion in debt, each one percent increase in interest rates increased interest payments on that debt by $58 billion. Now, US debt is about $23 trillion so easily each one percent increase will reduce dollars available to spend on actual programs by over $92 billion. For comparison, as of September 2023, the US has given Ukraine about $75 billion total in aid since February of 2022.

In short, this new conflicts arrives at a point where America has penned itself into a set of least-worst only choices. Any move in any direction is going to come at the cost of material pain to our economy, our priorities and our allies.



As heinous as the terrorist invasion of Israel is, it’s only a tempest in a teapot >>compared with the potential conflict between China and the U.S. if China invades >>Taiwan.

“I have spent most of my life worrying about things that have never happened.”

Mark Twain

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I was wondering about that. Apparently, the US pre-positions considerable inventories in Israel for release to the Israelis as needed. Beyond that, are the supplies given to Ukraine the same as Israel needs? Ukraine has been getting artillery shells and surface to surface rockets, SAMs, and AT rockets, not so much air dropped bombs, because Ukraine does not have much of an air force. Using artillery to level Gaza would be easier for Israel, but they have air superiority, so can use bombs, and, if the objective is to level a city, 2000lb bombs do a faster job than 100lb howitzer shells. Israel also would not need SAMs or AT rockets, as Hamas has neither aircraft, nor armor.



Good points regarding the dissimilarities in needs… I was thinking more in terms of weapons demand in an escalation… If Iran or Syria try to get directly involved. If Israel plans on obliterating Hamas by bombing Gaza street by street, they probably already have everything they need stockpiled within their border. (sigh)


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I don’t think that will do it. They’re probably looking at a ground invasion as well. But I think your point still holds - they probably have everything they need to accomplish that already stockpiled.

The real ordnance need is probably replacement rockets for Iron Dome.

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I think that should read under 1 ruble to the US penny. It is just a bit above a penny today.


Assad has been fighting an internal civil war for years. Probably not a lot of spare assets to use against Israel.

Iran would have a long way to go, to hit Israel. I remember reading about Iraq trying to help Syria against Israel in 73. Iraq did not have nearly enough tank transporters, so sent the tanks clanking on their way on their treads. They didn’t make it before they broke down.


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Expect Israel to literally bulldoze Gaza. Nothing left standing. Then annex the land (won in a war with an opponent who attacked them first). This will be a major change in the boundaries in the Middle East. Palestinians will be told the leave and not return. Shipped to Arab countries and dropped off. Fun for the countries getting the refugees, but this has been decades in the making. ALL the Arab countries knew it. Not IF, but WHEN. It is NOW.

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That depends on some missing reporting in the US. Purposely missing. Is Iran close to a nuke? We no longer hear. If so Israel and the US will strike Iran hard.

Is Iran on the edge of a nuke committing a blunder? Like a child that tells on himself or herself? This would be a surprising turn of events but should it be?

Both Israel and the US are fully informed on how close Iran is to a nuke. The public is not informed.

The first half of 2023 saw a dramatic increase in production. The second half Russia has committed to a pullback in production but not equal to the ramping early this year. Plus we do not know yet what to believe coming out of Russia.

The Arab oil producers want us to protect them against Iran. We do not know when Biden will call on them to produce more. Probably as of now. If not Biden the Western Cartel.

I was looking at this last night. Munitions for Ukraine are up and running and will be meeting daily demand in the next few months.

That does not mean we gave everything to Ukraine. The Pentagon won’t give full information to the public. There are reserves from the sounds coming out of DC.

So so true but there are periods of time when the fight is coming your way.

@steve203 great info

By some accounts, sure. Other accounts say that Netanyahu ignored all warnings because violence, especially lots of dead Israelis, would serve his purposes, giving him a fast path to full autocracy.

Remember, if he doesn’t succeed in killing democracy, he’s got lots of criminal indictments to deal with. His best way out is if he’s in charge.

Sound familiar?



The little I know about his indictments he was paying illegally for a newspaper to run a positive story on him. I think he was using government contracts to create the story with another company. I am far from an expert on this. It is nothing in the US totally commonplace here.

The court thing is unknown to most people. The court could say that the minister is bellicose and we do not want him in the government. In the US or UK, the courts never have any say over who is in the government or an administration just based on the positions of the minister. That is what is meant by curtailing the court.

I am not trying to argue the merits of what Bibi does. I am doing a hack job of saying what the issues are. I do not like Bibi.

The right wing in Israel is for universal care etc…the right wing is about security matters. Israel has felt at war all along.

Here in the UK the FTSE 100 is up 1.6% today!

A few terrorist attacks here and there, maybe.

Israel was caught completely flat footed. Israelis are scared. Bibi’s days in power will not be many. His decisions were based on what was best for Bibi, not Israel.

If this sounds vaguely familiar, it’s a coincidence. I don’t believe in coincidences.


I do not know how oil is doing today. I have not looked yet. Oil companies being up is good for the broader market.

No, I don’t think so. Israel can’t resolve the issue that way. There’s no country that would accept a million-plus Palestinian refugees, and Israel doesn’t have the capacity to move them all involuntarily even if there were. It certainly doesn’t have the capacity to force a nation like Egypt or Syria to allow them entry.

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There is a housing shortage on the Gaza Strip. The war of attrition is leaving for Europe or other Arab nations and not being allowed reentry. As some family members leave others will follow.

Today’s closing figures here in the UK:

FTSE 100 up 1.82

FTSE 250 up 2.25

It’s not done the UK’s markets much harm

That is not Israel’s problem. The Hamas govt started a war, so losing territory is a known potential consequence if they lose. Israel will annex the new territory and ignore what anyone else claims. Where the former residents go is up to their allies, no one else. Most likely they will be ignored–until they begin to create problems in Egypt and elsewhere.

It very much is Israel’s problem. Typically when territory is annexed into another nation (whether by treaty or agreement or conquest), the populace of that territory comes along with it. Some, or many, of the people will voluntarily leave - if they can secure passage and a place to go to. But if they don’t, they just stay.

Israel can’t physically move more than a million Palestinian civilians out of Gaza. Those people can’t leave voluntarily because no other nation they can get to will allow them entry. Israel can’t force any other nation to take them, nor any means of forcing them to leave involuntarily. They have no physical way to expel them into another country, if even they wanted to undertake that.