Stocks tumble as Middle East conflict rattles markets
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Stocks sank Monday as the Middle East conflict added a dose of geopolitical risk to the interest rate and inflation concerns already facing markets.
At the open, the Dow Jones Industrial Average (^DJI) dropped roughly 0.2%. The S&P 500 (^GSPC) lost about 0.5% while contracts on the tech-heavy Nasdaq Composite (^IXIC) fell nearly 1%.
Islamist militant group Hamas launched a large-scale attack on Israel on Saturday, prompting a declaration of war in response. That has rattled markets, as investors worry that another full-blown conflict could join the war already being waged by Russia and Ukraine.
"Geopolitical risk doesn't tend to linger long in markets, but there are many second-order impacts that could come through in the weeks, months, and years ahead from this weekend's developments," Deutsche Bank strategist Jim Reid said.
Oil prices jumped as much as 5% after the attack amid speculation that key crude-producing countries in the region could be pulled into the fray. WTI crude oil futures (CL=F) and Brent crude futures (BZ=F) were trading over 3% higher at last check as fighting enters its third day. Meanwhile, safe-havens gold (GC=F) and government bonds were in demand.
A sustained rally in oil could add to the inflationary pressures that already have investors bracing for another interest rate hike by the Federal Reserve.