The Israeli armed forces (IDF) announced Tuesday that they have begun local ground operations against Hezbollah targets in southern Lebanon. According to the army's announcement, “targeted ground raids” are being carried out in villages close to the Israeli border. The operation represents a significant escalation in the months-long conflict between Israel and Iranian-backed Hezbollah. Since the start of the Gaza war last October, the both sides have regularly fired across the border.
- Israeli Prime Minister Benjamin Netanyahu on Monday warned Iran, which supports both Hezbollah and Hamas, saying that “there is no place in the Middle East that Israel cannot reach.” The words came days after an air strike south of Beirut that killed longtime Hezbollah leader Hassan Nasrallah.
- In turn, a number of Western countries have warned Iran against direct involvement in the conflict, as this could result in Israel launching attacks on its nuclear infrastructure. At this point, Iran has not indicated whether it intends to intervene in any way, so Wall Street almost ignores the spreading conflict scenario.
- The United States, on the other hand, is trying to prevent the conflict from spreading in any way it can, particularly as the U.S. presidential election is a month away.
However, markets still see low odds for directly, military response from Iran or Saudi Arabia, so, the overall conflict is perceived as local war, not crucial for global oil supply dynamics.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appHezbollah's new acting leader Naim Kassem announced that the organization will continue the fight despite the deaths of Nasrallah and other senior commanders. He stated that the fighters are ready, and killed Hezbollah leaders have already been replaced.
- The Israeli military has called on residents of dozens of Lebanese border towns to evacuate to the north. The UN Force in South Lebanon (UNIFIL) described the Israeli operation as a “dangerous development” and called for de-escalation.
- The international community is watching the developments with concern, fearing an expansion of the conflict to the entire region. Turkey condemned the Israeli operation as an “unlawful invasion attempt” and Italy called for “urgent and necessary de-escalation.”
Market reaction
The first reports of the start of the ground operation came at 1 AM BST., but at that time we did not see a reaction in the oil market. Oil began to lose noticeably near the start of the European session, but these losses are now being recovered.
Source: Bloomberg Finance LP, XTB
Gold, on the other hand, has been gaining all along since yesterday's pullback around 8 pm, when Jerome Powell indicated that the Fed does not need to rush to cut rates. Around 1 AM BST, no reaction was seen. Nevertheless, gold has gained about 0.7% since the start of today's session.
Source: xStation5
