'Pax Romana' - is certainly not upon the Middle East these days, but actually barbarian Hamas attacks on Israel, and initially light probes by Hezbollah from the North, are primarily efforts to counter movement towards a 'security deal' and how that relates to Iran's (presumed) motivation to train & plan terrorism.

Freepik

I'm thinking the younger generations in the Middle East were preparing for peace, while Iran wants retrograde and a return to medieval barbarism as just seen. I note achievement of 'peace' or at least civility with many Moslem countries in their relationship with Israel, this is obviously designed and planned by Iran it seems, and the U.S. Navy better watch Persian Gulf Oil transit points closely.

That 'speculative deal' between the USA, Israel and Saudi Arabia was also amplified even by Prime Minister Netanyahu's remarks at the United Nations, (sensitive given regional mentalities reluctantly stuck in the Middle Ages), are reflected in-part with the timing of the attacks, likely signed-off on by Iranian IRGC advisors during a meeting in Beirut last Monday, per speculation so far. Meanwhile expensive projects mask a still-retarded or at least slow nature of social progress among a slew of Arab countries (but some are trying). Enough reason for Tehran's radical religious zealots to attempt to break up this trio.

The Mullahs will fail, although expanded conflict can't be denied plausible. For sure I don't trust Saudi Arabia, but in that part of the world there's a saying we all know well: 'the enemy of my enemy is my friend'. So that's the relationship close to be arranged between Riyadh and Jerusalem. Hamas/Iran is a spoiler and at least the former has to be eradicated, while the latter is a challenge.

At this point markets are tame, partially with Bonds close on Monday, but also with Iran 'saying' they weren't culpable, it's conceivable this ratchets down at least briefly from a regional perspective. As Israel's dispatching El Al Boeing 787 Dreamliners to pick-up reservists in major cities like London & New York, I presume that amount of capacity says there is a need for 'fuller' mobilization, and total resolution of the Gaza situation (too bad people there weren't willing or able to toss Hamas out on their own). El Al is also how so many reporters, seemingly immediately, got into Tel Aviv, with Delta and American halting all flights after one got in, which may have been an earlier United flight. (For now El Al is busily taking tourists or foreign nationals 'out', returning with reservists determined to confront the biggest threat to Israel in decades, and indirectly to to United States and Europe, if they have vision to see the bigger picture.)

Odds are the situation will get worse. And thereafter it will get worse. As far as Gaza is concerned. U.S. markets are elevated by Oils and should see coming rebounds in big-tech and semiconductors. And US. companies like Intel won't cancel plans to build a new major semiconductor fab plant in Israel. That sure would be capitulating to the enemy, and while the attack was a fiasco from an intelligence standpoint (Mosad and Shin Bet have more than egg on their face after this), sort of like Isis did it during bin Laden, the terrorists planned much of their evil by carrier-delivered messages and in-person meetings. Old school approaches that defy modern 'signals intelligence' and IR satellite monitoring.

USS Gerald Ford and it's full 'carrier battle group', were cruising in the Ionian Sea just off the Dardanelles, exercising with Greek and Turkish vessels as is related to the Ukraine War and shipping protection (exiting the Black Sea). So the U.S. Navy barely had to point the other direction to get into position if they are needed, to intercept any missiles launched from Iran, or Syria (both have ballistic missiles which are well beyond the ability of Iron Dome to intercept, at the same time David's Sling -a bigger system- and Patriots can intercept too).

The point is the Navy destroyers and cruisers carry Standard 3 surface-to-air missiles which 'can' intercept ballistic missiles after newer software developed as a result of trials in the Sea of Japan when North Korea launched missiles. I think the US Navy provides deterrent and validates 'we have your back' firm statements from The White House. (Which finally understands 'peace through strength' and not appeasement...because money is fungible, which means the devils in Tehran could spend other money on weapons and terror 'even if' the money we unfroze is used for so-called humanitarian purposes.

So, 'if' Iran stays out of this, it will still be a messy situation and sentiment will in time (from the usual naive countries) shift away from sustained resilience (I hope to be wrong on that) behind Israel's noble effort to exterminate vermin at the same time they ponder what to do with 2 million displaced Arabs...there's so much controversy about that...as none of their breathren want them either as you would think media would point-out Egypt, Saudi and Syria deny them). In any event we'll see how that plays out, if Iran stays out, Oil may ease a bit.

Market 'X-ray: 

With the Bond market closed for Columbus Day, eyes were for sure focused on the Gaza war on Israel (fortunately all terrorists neutralized or back in Gaza, with none known remaining in Israeli territory), and later some hints of softer Fed policy (perhaps with geopolitical risk they want to stop the persistent rates hike or related pressures). The CPI later this week will tend to enlighten more on that, but geopolitics is overriding for now.

If you've followed my 'X'-rays (formerly Twitter Tweets), you know my reaction over the weekend to the barbarism and hostage taking, and the stunning fact of a colossal lapse of intelligence by the Israeli agencies who needed to focus on that, not just Jerusalem protests. Media isn't saying it, but I'm suspecting a lot of the Jerusalem agitation was a 'ruse' or distraction, intended to divert the attention of the IDF from the Gaza border. Chutzpah says the didn't think hard enough.

Even our own Sec'y. of Defense 2 weeks ago is quoted as saying essentially 'we can move Forces to the Pacific where threats exist, since the Middle East is as quiet as we've seen for 20 years'. Of course, 'calm before a storm comes to mind. It's a horror and the news may yet get worse... so from both a market and human aspect, one can do little but prepare, mobilize what may be needed, and pray and cross fingers that some hostages are rescued. Those terrorists behave as brutally as nomadic desert tribes centuries ago.

It's impossible and inappropriate to put the geopolitical backdrop aside. But if we were to do so, with so many stocks already smoked, fried, or diced, well it suggests this October could evolve into a favorable structure for the future. It's obviously dependent on Oil prices, and if Oil comes down instead of up, that's also going to help bonds to rally and take some of the pressure off investors.

A 'softish landing' would help kick-start another growth phase but it has to get going, and while a change of 'tone' by some Fed members is discernible, we are not at the point of acknowledgment by the Fed, which the market's trying to perk up for. And of course geopolitical situations can be overriding factors.

The blood-curdling barbarian statement by Hamas this evening, that they will kill a hostage for every attack on Gaza, is essentially why there just might be a massive effort to mount a rescue operation, even with low odds of success.

Bottom-line: 

Bond market Closed for Columbus Day, stocks defensive but a mostly-muted reaction to the conflict, at this point.

Whether the 'war' will be just a ripple or a tsunami for Oil and even the S&P, is not known. Antagonisms prevail, and this may be more about the Persian Gulf than the Mediterranean, where conflict is overtly occurring. Vulnerabilities are pretty obvious and the dynamics very fluid, both politically and militarily. That's why the U.S. Air Force, not just the U.S. Navy, are increasingly posturing for action, if required. Sanctions against Iran should be reinstated or emphasized if linkages such suggested (the meetings in Beirut for-instance) are affirmed.

Stock market behavior is secondary, but will respond, especially Oil markets.

More By This Author:

Market Briefing For Monday, Oct. 9th
Market Briefing For Thursday, Oct. 5
Market Briefing For Wednesday, October 4