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Corporate implications should the Israel-Palestine conflict spread into a wider war

Armed conflicts and wars displace and destroy human capital, damage the social and economic fabric of warring nations, and endanger civil liberties.

Cross-border incursions also have an adverse impact on local and international companies operating within the conflict zone and beyond. This is because we live in an interrelated world where corporations and financial systems are intricately linked to governments, intergovernmental organizations, central banks, global trade and supply chains, technology, stock, currency and commodity markets. The ongoing Israeli-Palestinian conflict may be no exception as it is the deadliest in several decades.

There are over 500 multinational corporations operating in Israel. Several global companies have temporarily suspended operations in Israel or asked employees to work from home. These include Delta Air Lines, American Airlines, United Airlines, Air France, Lufthansa and Virgin Atlantic, oil major Chevron, banking giants JP Morgan Chase, Bank of America and Citigroup, and clothing company H&M.

While the impact of the Israel-Palestinian war on the global economy is likely to be limited as both nations are not significant oil producers, that could change if the conflict escalates or spills over to the rest of the Middle East, particularly Iran, as their involvement may then risk pulling in the US into the conflict. In such a scenario, here are the primary risks and implications for corporates and the wider global economy:

Surge in oil prices, another wave of inflation, and higher-for-longer interest rate scenario

Following the eruption of violence between Israel and Hamas, global oil prices rose, but if the conflict intensifies or spreads across the Middle East region, it can have a dramatic effect on oil prices, as well as threaten the world’s oil supply.

According to S&P Global, the Israel-Hamas conflict has “Fanned worries of a long-drawn period of geopolitical turbulence in the Middle East at a time when oil markets have already been facing a squeeze in global supplies, while demand has strengthened, led by jet fuel. This has rekindled the debate on oil crossing the $100/b threshold again.”

Concerns that oil could surpass the US$100 per barrel threshold, compared to the price level of about $88 per barrel last Monday (the first trading day after the unprecedented war broke out between Israel and Hamas), suggest that such a spike in oil prices may trigger another wave of inflation in the already fragile global economy.

This could mean interest rates remain on the higher side for longer and borrowing costs for corporates stay elevated, which would likely weigh on their future earnings, cash flow, and stock prices.

Closure of Strait of Hormuz could disrupt region’s supply chains and impact international trade

An escalating warfare between Israel and Hamas, may not only undermine the last few years of efforts of central banks to rein in inflation, but also disrupt the region’s supply chains and drag down economic confidence worldwide.

According to the publication StrategicRISK, “The Strait of Hormuz is a vital conduit for transporting crude oil to the rest of the world and a huge, connected risk in global supply chains.”

The Strait of Hormuz lies between Oman and Iran and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The Strait is widely regarded as one of the world’s most strategically important passage or shipping lanes for international trade given that “Oil tankers carry approximately 17 million barrels of oil each day through the Strait, or 20 to 30 percent of the world's total consumption”, as per the Robert Strauss Center for International Security and Law at the University of Texas at Austin in the US.

“The Strait contains eight major islands, seven of which are controlled by Iran”, observes the Strauss Center, and if Iran were to get involved in the Israel-Palestine conflict, it could endanger the passage of vessels carrying about a fifth of the world’s crude oil supply by closing or choking off exports through the Strait.

This might significantly disrupt global oil supplies and prices, delay shipments, and push up raw materials, manufacturing, freight and insurance costs, essentially impacting every component of the region’s supply chains and affecting corporations that rely on Middle Eastern suppliers for key products or components.

Additionally, it is likely to build uncertainty around global supply chains and affect international trade, particularly for countries that have robust trade relationships with Israel such as the US, China, India, and Germany.  

Cyber warfare

The effects of the Israel-Hamas war have extended to news media.

Israel's most-read English news website and best-selling English newspaper, The Jerusalem Post, was hacked on October 8.

"The Jerusalem Post has been targeted by multiple cyberattacks this morning causing our site to crash," the Israeli newspaper posted on X (formerly Twitter) on the morning of the cyber attack.

The ongoing military and political conflict is likely to “Play out with equal intensity in the cyber arena. Experts have warned of rising instances of intelligence hacking and grid disruptions, that would affect allied nations of both sides”, wrote Devina Sengupta, deputy editor at Mint (a prominent business publication from India), in her recently published article in the Indian financial daily newspaper.

With cyber attacks likely to rise, Cybersecurity organization CyberCX said that “Groups previously focused on Russia’s invasion of Ukraine are refocusing on Israel-Hamas war”, as was reported in an article in the Guardian two days after the conflict commenced.

A day earlier, Bloomberg reported that hacking groups, including some tied to Russia, had begun attacking Israeli government and media websites since the military conflict began. While these attacks have had little impact so far, it can escalate into a “Full blown cyber warfare”, remarked Siddharth Vishwanath, Risk Consulting, Markets and Emerging Business Leader at PwC, India, in the recent article published in Mint.

Some experts believe that such cyber attacks may have commercial motivations, in addition to political considerations.  

“The cyber warfare will see more players. We will see a rise in cyber attacks for commercial gains and a cyber war also brings newer malware and ammunition to the world of cyber crime”,  Vishwanath added.

With the interconnectedness of geopolitical conflict and cybersecurity, “A new battleground has opened up in cyberspace, with hackers from both sides trying to attack each other's infrastructure, while also dragging supporters of each other into the conflict”, wrote Shweta Sharma in an article recently published in CSO Online.

Data from Cloudflare shows signs of cyberattacks in the form of Distributed denial-of-service (DDoS) attacks impacting both Israel and Palestine.

Cloudfare defines a DDoS attack as “A malicious attempt to disrupt the normal traffic of a targeted server, service or network by overwhelming the target or its surrounding infrastructure with a flood of Internet traffic.”

"Two networks (autonomous systems) in the Gaza Strip went offline a few hours after the Hamas attacks on October 7. Subsequently, on October 9, two additional networks also experienced outages. We also saw an uptick in cyberattacks targeting Israel, including a 1.26 billion HTTP requests DDoS attack, and Palestine," Cloudflare said in a blog post.

As the war intensifies between Hamas and Israel, experts warn that the cyber warfare may spill over or extend to other non-warring countries. This means corporations regardless of where they are located will have to reinforce their defence capabilities, deploy new security layers and tools, carefully scrutinise their supply chains, enrich security intelligence, and emphasise adequate and regular security training, specifically payment fraud training ( as measures to up their ante on cybersecurity.

New geopolitical risk may boost gold as a safe-haven asset and strengthen the dollar

In times of geopolitical turmoil, gold is considered the most favoured safe-haven asset.

With the Israel-Hamas war breaking out, the global stock markets remain nervous given the potential for the conflict to worsen and spread. This may have bolstered the safe-haven appeal of gold helping it gain 1.6% on Monday (October 9), its biggest one-day jump in five months, Reuters reported.

According to Reuters, spot gold (regarded as the current market price or value of gold), was up 1.1% and reached $1,853.20 per ounce, its highest since September 29. Meanwhile, US gold futures settled 1% higher at $1,864.30.

Last year it was the Russia-Ukraine war that thrust geopolitical risk into the centre of global discourse, and now the Israel-Palestine conflict has once again brought geopolitical risk to the forefront of global conversation.

This new geopolitical risk makes gold a valuable risk hedge against political and economic uncertainties, and may spark an uptick in the precious yellow metal as a reliable store of value should the conflict spread further or more countries are drawn in.

Bob Haberkorn, senior market strategist at RJO Futures told Reuters that “There are a lot of questions about what could happen next in the Middle East, if the situation further escalates, then gold prices could move towards $1,900.”

Gold and dollar invariably move in opposite directions, but amid a geopolitical crisis or war, investors tend to rush for safe havens and seek out the US dollar because of its status as the world’s dominant reserve currency. This is likely to propel the dollar should the conflict deepen.

Furthermore, with expectations that interest rates will remain on the higher side for longer, which is likely to make bond yields go up, the dollar will become more attractive for investors. However, a strong dollar can take a bite out of corporate earnings, particularly for US corporations doing business abroad or getting most of their profits from overseas. These US companies can suffer from the rising and strengthened greenback when they convert foreign sales back into dollars.


Bloomberg reported last week that a wider war in the Middle East could be “The trigger for a global recession. Soaring oil prices and plunging risk assets would deal a substantial blow to growth, and take inflation a notch higher.”

Not only will the armed conflict take a heavy human toll, but it may also leave “Global inflation at 6.7% next year” and “Take oil to $150 per barrel”, predicts Bloomberg Economics’ model.

It can also result in “1 percentage point drop in global growth — taking the number for 2024 down to 1.7%”, Bloomberg Economics further added.

History teaches us that nations at war have to pay a very hefty price. The human costs will be immeasurable. The economic repercussions of a deadly military clash won’t just hurt Israelis and Palestinians. There will also be collateral damage in different parts of the world.

When it comes to major warfare, no country or region really wins. For the warring nations, Aristide Briand, France’s longest serving First World War premier, offers an important reminder - “In modern warfare there is no victor. Defeat reaches out its heavy hand to the uttermost corners of the Earth and lays its burdens on victor and vanquished alike.”

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