Investors are keeping a close eye on the situation in Israel following a surprise attack launched early Saturday by Hamas – the militant group that controls the Gaza Strip, a heavily populated coastal Palestinian territory – because of the possible geopolitical risks it could pose to global financial markets.
The Israel-Hamas conflict is a protracted and deeply rooted dispute between Israel and the Palestinian group Hamas, primarily concentrated in the Gaza Strip.
The conflict revolves around historical, territorial, and ideological differences, resulting in recurrent cycles of violence, ceasefires, and international mediation efforts.
Concerns are emerging among investors regarding the ongoing instability in the region, which may result in a transition toward safer investment options, thereby increasing the demand for assets that provide a safe haven.
Geopolitical events in the Middle East historically have had a significant impact on financial markets, and this latest turmoil is no exception.
As tensions escalate, market participants are becoming increasingly cautious, and this caution is reflected in their behavior as they seek refuge in safe-haven assets.
Saturday saw Hamas gunmen penetrate Israel for the first time, sparking Western outrage, with the United States leading the push in supporting Israel.
Safe-Haven Appeal And Financial Accessibility
This incident may enhance geopolitical anxiety and investment in safe-haven assets like gold and the US dollar, driving up Treasuries demand.
Analysts say these securities have sold off recently as investors seek sanctuary in less risky assets amid global uncertainty.
The US dollar typically strengthens during global unrest as it is seen as a safe haven currency. This is due to its stability, the confidence in the US economy and financial markets, and potential monetary policy actions by the Federal Reserve that can devalue other currencies relative to the dollar, making it more appealing to investors seeking security in times of global turmoil.
Peter Cardillo, chief market economist at Spartan Capital Securities, said:
“Anytime there is international turmoil, the US dollar strengthens.”
Cardillo also pointed out that this exemplifies the significance of including gold inside one’s investment portfolio. According to the economist, it serves as an effective safeguard against global instability.
Speculation that US interest rates would remain elevated for a prolonged period of time has prompted market movements in recent weeks. As the US currency has been on a winning streak, bond rates have risen sharply. Stock prices, on the other hand, dropped significantly throughout the third quarter but have leveled off in the last week.
Hamas’ surprise attack in Israel sends shockwaves through global markets, underlining the urgent need for safe-haven assets. Cryptocurrencies emerge as a compelling choice, potentially surpassing traditional havens like gold and the US dollar.
Cryptocurrency market cap currently at $1.06 trillion. Chart: TradingView.com
In the face of soaring geopolitical risks, cryptocurrencies shine as the assets to acquire, offering a new frontier in financial safety and security.
Brian Jacobsen, chief economist at Annex Wealth Management, shares his views on the situation in Israel:
“Whether this is a massive market moment or not depends on how long it lasts and whether others are sucked into the conflict.”
How Cryptocurrencies Could Benefit Amidst Middle East Conflict
The ongoing geopolitical conflict in the Middle East, particularly between Israel and Hamas, has inadvertently highlighted several potential positive impacts on cryptocurrencies. Firstly, heightened geopolitical tensions can serve as a catalyst for increased interest in digital assets as a safe-haven investment.
Cryptocurrencies, like Bitcoin, have been increasingly regarded as “digital gold” due to their finite supply and decentralization, making them an attractive option for investors seeking refuge during uncertain times.
As traditional safe-haven assets like gold and the US dollar face challenges, cryptocurrencies could emerge as an alternative store of value.
Secondly, the conflict emphasizes the utility of cryptocurrencies in facilitating cross-border transactions and providing financial accessibility to individuals affected by political turmoil.
In regions with strict capital controls or unstable financial systems, cryptocurrencies can offer a means of preserving wealth and conducting international trade outside the traditional banking system.
This conflict emphasizes the need of borderless and censorship-resistant financial instruments, bolstering cryptocurrencies’ role in financial inclusion and resilience in geopolitical tension zones.
The Middle East conflict indirectly shows how cryptocurrency could boost global investment and financial empowerment in crisis-stricken places.
Featured image from Yahoo Finance