Macro Digest: Middle East in Focus Macro Digest: Middle East in Focus Macro Digest: Middle East in Focus

Macro Digest: Middle East in Focus

Steen Jakobsen

Chief Investment Officer

Summary:  The dramatic situation in Israel after this weekend's attacks could prove a geopolitical game changer. While the fog of war makes any predictions on what might happen next impossible, the situation should be at the center of our attention as we hope for peace, while also considering the possible impact on financial markets and our portfolios.

This weekend’s attack by Hamas into Israel has now cost at least 1,100 people their lives. 700 in Israel and 400 on the Palestinian side. The situation is tense and many are already calling it the 9/11 of Israel.

There is no doubt for us that the next month or two will see increased focus on the Middle East and the consequences of the situation for energy, politics and especially the dire situation for civilians on both sides. This note is only an attempt to gauge the impact of the situation on financial markets, not to comment on the conflict itself. Rest assure we are as concerned as anyone for the well being of innocent civilians across the region.

The Middle East is of course a key provider of both oil and gas and via the Suez Canal also a critical transport hub for global containers and energy.

The macro impact:

  • Energy: WTI and Brent are up 3.5% this morning. The market will not want to be short at a time where global stock levels remain tight, and following the recent correction the net long in the market, especially in Brent, looks a lot leaner with traders now focusing on rebuilding a geopolitical premium into the price. (Our commodity strategist Ole S Hansen will make a separate report)
  • Gold:  XAUUSD is up 1.0% in a safe haven bid. The market is short Gold, but also still cautious with high real rates in the US (which is the main driver of Gold) – We have seen net buying from sovereigns in Asia and believe gold offers good values at these levels ($1,830-1850) in highly volatile and tense situations
  • Fixed Income: Small bid across all maturities in fixed income. The June SOFR contract (3-month US rates) is down 6.5 bps in yield, 10Y futures ar bid, but off their overnight highs. We continue to suggest that US 2-year treasury notes are the safest of assets in fixed income:
  • USDJPY and EURCHF are the classic safe-havens inside foreign exchange, although USDJPY tends to be rate sensitive (higher yields = lower yen). USDJPY trades almost unchanged 149.15 (vs. 149.35 close Friday). EURCHF sees CHF stronger at .9600 from .9635 Friday.

Market Comment: Market concerned about the scale of not only operations in Israel’s immediate neighborhood in the Palestinian territories and Lebanon, but also the risk of escalation with Iran due to its sponsorship of forces hostile to Israel. Hence the focus will be on anything Iranian: new political initiatives, sanctions, risk of retaliation on Iran’s infrastructure and general news. Two days into the conflict the big actors China, Russia, Saudi Arabia are all indicating and expressing the need for a peaceful solution. This is good news, but behind the scenes, no one doubts that Russia and Iran have an openly friendly relationship and both support, indirectly or directly, Syria, Hamas, Hezbollah and the PLO.

Fixed Income: 2y government bonds remains our go-to investment depending on your currency region – German 2-year bonds for euro investors, US 2-year notes for USD-based investors and 2-year Gilts for UK-based investors.

Equities: Long Energy, defence stocks (unfortunately), cybersecurity, infrastructure and semi-conductors will be overweight sectors. This is not a new allocation for us. Peter Garnry has been highlighting these baskets for all of 2023.

Concerns related to Russia's intentions

Among macro players there is a strong suspicion that that Russia may look to weaponize energy this winter:

  • Strategic reserves are at modern historic lows in the US. Reserves are at an all-time high in China, the largest importer of foreign oil.
  • The new BRICS countries represent something like 6 of world largest oil producers and two biggest importers. Strong message?
  • Russia has had high levels talks with Iran and closed even tighter relationship over the summer.
  • Iran is supporting both Hezbollah and Hamas with both weapon and training and as WSJ wrote back in April seems to have been planning this attack.

Finally, a personal comment from a veteran in global events. I have not been this nervous in my whole career. Yes, I am definitively of the “sceptical kind” but this weekend events hit harder because:

  1. It’s in the Middle East – which means energy impact but also a volatile political regions.
  2. Reminds me of how 9/11 changed everything for the worse. Distrust, going-alone, with US or against US, profiling of religion, blatant disrespect for individuals, their civil rights and not least democracy
  3. How immigration became a toxic subject and how it defined the “fringe-political parties” on the far left- and right
  4. We have highest social inequality in modern history, worst debt load and smallest productivity.
  5. Markets are richly priced. Too richly. This could – not saying it will – start cascading sell-off based on lack of transparency and visibility on rates, inflation , energy but not least the need for a geopolitical premium.
  6. This is an issue completely off the market’s radar and the ongoing obsession with the cycle and Fed rates, etc. – key players may feel it is time to head for safety first and reassess. This makes it more important to be agile, flexible and objective.

All in all, be careful and remember standing up for democracy means not only accepting the vote of the majority but also protecting the minorities.

Safe travels,


Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (
- Full disclaimer (

Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.