The stunning violence in Israel, with hundreds killed as fighters from the Hamas movement invaded from their Gaza enclave and Israel responded in force, added the possibility of a broader Middle East conflict to the sense of global instability sparked by Russian military actions almost 20 months ago.
But the war has the potential at least to add an unpredictable set of forces to a global economy that was already slowing and to U.S. markets still adapting to the likelihood that the Federal Reserve will maintain high interest rates longer than many investors had expected. For central banks it poses the dilemma of whether it is likely to lead to new inflation pressures - the region is not just home to major oil producers like Iran and Saudi Arabia, but also to major shipping lanes through the Gulf of Suez - or deal such a blow to confidence that the economy stutters.
"The conflict poses a risk of higher oil prices, and risks to both inflation and the growth outlook," said Karim Basta, chief economist at III Capital Management, leaving the Fed to sort out whether higher prices or slower growth is the greater concern.
Source: Entertainment Trends (entertainmenttrends.net)
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