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• Hamas launched an unprecedented attack on Israel over the weekend.
• Jason Trennert of Strategas says wars tend to result in inflation.
• He recommends owning energy stocks as oil prices inched up today.

Oil prices are trending up today after Hamas – the Palestinian militant organisation launched an attack on Israel over the weekend.

Market strategist recommends buying energy stocks

Responding to one of the deadliest offensives it has ever faced, Israel ordered a “complete siege” of the Gaza Strip this morning making some believe that the growing conflict will have “ripple effects for years”.

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Also on Monday, Jason Trennert of Strategas said the conflict that has already killed more than 1,300 on both sides, including nine Americans, could deliver upside in energy stocks as wars tend to be inflationary.

“XLE” – the Energy Select Sector SPDR Fund had ended last week just above the price at which it started the year. Brent crude and West Texas Intermediate are exchanging hands at north of $88 and over $86, respectively, at writing.

Israel-Palestine conflict could lead to stickier inflation

Trennert told clients in a research note today that Israel-Palestine war may continue to exert upward pressure on oil – turning inflation stickier than it already is.

It’s difficult not to assume that the war is likely to put a bottom in the price of oil; this, in turn, may put pressure on the U.S. consumer.

🚨🚨BREAKING: The Israeli ground invasion into Gaza will start tonight .#Israel #Palestine #Hamas #طوفان_الأقصى #IsraelPalestineWar #طوفان_القدس #IsraelUnderAttack #GazaUnderAttack #Gaza
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— Kate Bolduan (@Visegrad22) October 9, 2023

Note that inflation jumped back to up 3.7% (year-on-year) in August versus up 3.2% in July. If the September report due on the coming Thursday comes in hot again, the U.S. central bank may have to consider not just leaving rates higher for longer but raising them further as well.  

While such a scenario doesn’t really paint a rosy picture for the stock market at large, the war-driven surge in oil prices will likely see energy stocks rally in the coming months, the Strategas’ expert concluded.

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