The Facts
After Hamas' surprise attack on Israel over the weekend, Israeli stocks sank by 6.5% by Sunday. Shares in nearby countries also fell, with Egypt's market declining by 2.6% while Saudi Arabia's fell by 1.6%.
By Tuesday, the Tel Aviv Stock Exchange bounced back somewhat but remained short of figures prior to the escalation of violence.
The Spin
Narrative A
Although this geopolitical conflict is worrying for the market in general, importantly, this situation will likely be limited in scope, duration, and consequences in terms of oil prices. Higher volatility, however, could be expected as the conflict unfolds.
Narrative B
Rising tensions in the Middle East could turn the tide against further Federal Reserve interest rate hikes, and may even lead to an easing next year. Easing these rate hikes may decrease pressure on the US and even the global economy.
