The Israel-Hamas conflict could fuel inflation, depress growth, and hit the stock market, experts say.
Johannes Eisele/AFP via Getty Images
- The Israel-Hamas conflict could hit stocks, fuel inflation, and slow growth, experts say.
- The Fed might hike interest rates to curb price growth, or cut them to escape a recession.
- Billionaire investor Bill Ackman called out US foreign policy, while Chamath Palihapitiya laid out why oil could surge.
The brutal Israel-Hamas conflict threatens to stoke inflation, choke economic growth, and pull down stocks, some of Wall Street’s top investors and strategists have warned. They say the clash could put the Federal Reserve in a bind as to whether it keeps hiking interest rates to cool price increases, or reverses course to cut the risk of a recession.
Meanwhile, billionaire investor Bill Ackman blamed the clash on America’s foreign-policy failures, Chamath Palihapitiya warned oil prices were likely to jump, and several experts including Ed Yardeni predicted market sentiment will soften.
Here are the comments from 6 experts:
1. Bill Ackman, billionaire CEO of Pershing Square, in an X post:
“Why did Hamas invade Israel last night? Because the United States has consistently not kept its word on its foreign policy commitments and we look very weak.
“Terrorism loves a leadership vacuum and we have created one. The world has become a much more dangerous place because we have not kept our word. This needs to stop now or, dare I say, hell is coming. The world is a much safer place when the US leads, and it quickly can become a living hell when we fail to do so.”
2. Chamath Palihapitiya, billionaire CEO of Social Capital, in an X post:
“Biden drained the SPR to help push down US CPI when oil looked like it was going to $100. How does oil not spike again now on the back of two hot wars (Israel-Hamas and Russia-Ukraine) and a 1.5M barrel production cut by OPEC with an SPR that is at the same level it was in the mid 1980s?
“If inflation then spikes back up, what does the Fed do? The Fed is already in a game of chicken with the bond market and is under a lot of pressure to do no harm and ideally start the cutting cycle soon. This would make that path much less likely.
“And if all of these events roil the capital markets and potentially triggers a recession, the establishment version of ‘the solution’ in Washington will regain favor. Their intentions have always been clear: escalate our involvement abroad as a source of US pride, growth and hegemony. This will mean getting deeper into Russia-Ukraine and now potentially Israel-Hamas.”
3. Ed Yardeni, president of Yardeni Research, per Bloomberg:
“Geopolitical crises in the Middle East have usually caused oil prices to rise and stock prices to fall. Much will depend on whether the crisis turns out to be another short-term flare-up or something much bigger like a war between Israel and Iran.”
4. Russ Mould, investment director of AJ Bell, in a morning note:
“The wider risk is that a sustained increase in oil prices would act as a renewed inflationary pressure and further underpin the higher rates for longer message which investors in the equity and bond markets seem to be belatedly coming to terms with.”
5. Guillermo Santos, head of strategy at iCapital, to Bloomberg:
“It is evident that any extension of this to oil-producing countries, Saudi Arabia in the lead, could make the price of crude oil more expensive with negative inflationary effects for the West and would mean higher rates for longer and falling stock markets if the above caused a recession.”
6. Anthi Tsouvali, multi-asset strategist at State Street Global Markets, to Bloomberg:
“The timing of the conflict could not have been worse given the talks between Saudi Arabia and Israel. A conflict in the Middle East has obvious implication in oil prices. Markets will worry about higher energy prices and since we are already in a risk-off environment, that could push equity markets lower.
“Equity markets should see through this in terms of repricing risky assets but sentiment has the potential to stay subdued for longer as the market narrative shifts from soft landing to higher-for-longer and in the long run that would be bad for equity markets.”
