How The War In Israel and Gaza Is Shaking Financial Markets And Affecting Your Wallet

Israel’s October 8 declaration of war following its bombardment by the militant Gaza-based group Hamas is already jolting global markets. Higher prices for oil and gold, a stronger U.S. dollar and the decline of airline stocks have been some of the immediate financial effects of this conflict, which has the potential to destabilize the Middle East region.

The War’s Initial Impact On International Markets

When the U.S. markets opened Monday, investors reacted energetically to the catastrophic events in Israel. Prices jumped for crude oil, gold and the U.S. dollar. They have since leveled off.

Many airline stocks dipped Monday, including Delta, United and American Airlines as well as European airlines like International Airlines Group (owner of British Airways) and Lufthansa. In most cases, prices recovered the following day, though the travel situation remains volatile.

How The War Could Affect You: Travel Delays, Higher Gas Prices

As Ukraine’s war against Russia has shown, foreign wars have consequences that can affect Americans. The new war in the Middle East could impact Americans in a number of ways:

• Gasoline prices could increase. The rise in oil prices might well lead to a price bump at the pump, similar to what happened after Russia attacked Ukraine. In 1973, during the Arab-Israeli war, oil suppliers from the Middle East cut off the U.S. for its support of Israel, sending U.S. gas prices sky-high. Though current prices have calmed after the initial leap in crude oil prices, it might be wise to keep your gas tank full in case the war in Israel expands.
• International flights have already been canceled, and schedule disruption may continue. Flight cancellations and delays began to occur in Israel and surrounding countries over the weekend. There could be a ripple effect for some travelers, as carriers cancel or reroute flights to the affected region. If you have plans to travel to Europe in the near future, keep a close watch on your flights. Also, check your travel insurance coverage as most policies will not pay out for disruptions related to war.
• Investors’ flight to safety could strengthen U.S. dollar, gold. The rush Monday morning to longstanding safe-haven commodities like gold and the U.S. dollar has since stabilized. Most investors appear to be in a holding pattern after the market initially reacted to the Israeli news, indicating there is no need to be hasty. However, if similar rushes continue to occur in the future, it’s possible the dollar could get too strong, making the cost of American exports too pricey for foreign buyers.

Military Aid Issue Complicates U.S. Government Budget Impasse

The war in Israel is sure to raise concerns in Congress about whether the U.S. government should fund military aid to both Israel and Ukraine. Lawmakers’ ongoing dispute over continuing to help Ukraine in its war with Russia has already created a legislative logjam that nearly caused a government shutdown on October 1.

As the clock ticks toward Congress’s mid-November deadline to approve the government’s annual budget, President Joe Biden and Democrats still want Ukraine’s funding to be included in the spending bills. Without a speaker in the House, discussion about adding funding for Israel is likely to amplify contentions, complicate the transition to a new speaker and bog down the passage of all legislation.