Market Extra: How the Israel-Hamas war is rippling through markets and hurting Israel-focused ETF

by | Oct 16, 2023 | Stock Market

Geopolitical tensions in the Middle East are weighing on investor sentiment in the exchange-traded fund market as traders watch for ripple effects from the Israel-Hamas war. Shares of the iShares MSCI Israel ETF
which holds Israeli stocks, finished Monday 0.7% lower while equities in the U.S. broadly rose, according to FactSet data. The fund has tanked since the Israel-Hamas war began earlier this month, down 10.2% so far in October, while seeing outflows over the past week. 

Last week the iShares MSCI Israel ETF suffered its biggest weekly loss since the COVID-19 crisis of March 2020, sinking 9.8%, FactSet data show. The fund tumbled 7.1% on Monday, Oct. 9 alone as investors reacted to Israel’s declaration of war following a surprise attack by Hamas.  “The market is going to be watching if Iran gets involved” should Israel carry out a ground invasion into Gaza, said Anthony Saglimbene, chief market strategist at Ameriprise Financial, in an interview with MarketWatch on Monday in New York. Spillover effects from the war could harm the U.S. economy should oil prices spike as a result, complicating the Federal Reserve’s efforts to bring down inflation to its 2% target in a so-called soft landing, according to Russell Price, chief economist at Ameriprise. High oil prices risk leading to a pullback in consumer spending in the U.S., with increased gas prices at the pump making it tougher for people to make purchases elsewhere in the economy. “It would definitely hit consumer discretionary spending,” which could ti …

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