Israel-Hamas Journal: October 17, 2023
Gold and oil did not confirm the move in VIX yesterday.
Israel-Hamas is going to be a critical input to interpreting cross-asset market signals for the foreseeable future, so I wanted to carve out a specific space on The WOTE for commentary related to the war in the context of how markets are moving. These journal posts will be hidden from the home page so they don’t clutter the site, and if you don’t want to receive these specific posts you can simply unsubscribe from this specific newsletter.
I continue to believe the October 8 interview with a top Hamas official is mission critical context for interpreting war developments. For instance, prominent Jew Ben Shapiro said yesterday that he believes Hamas did not expect to have this much success and that all they wanted to do was essentially create a disturbance to ruffle feathers. If that’s true, then it’s very unlikely Iran will do much to follow-on if anything, and once Israel is done taking out Hamas’s military infrastructure then the conflict will be over.
According to the October 8 interview, Hamas had planned this for two years. That fact alone suggests there is an above-average chance there is a larger plan at work here.
The problem with the ‘larger plan’ thesis is the power of the US military. It’s likely that a single US aircraft carrier could largely decimate Iran, so it’s tough to see what Iran’s strategy is here.
This is where cross-asset market analysis will be key for confirming developments on the ground. Friday’s move in VIX, oil, and gold was the first real indication of worry by the market, and based on the reversal in VIX on Monday at first blush one would think Friday was an overreaction and Israel-Hamas is likely to stay contained. But oil and gold barely budged on Monday, suggestive of elevated geopolitical risks remaining firmly in place.
It’s still very early days, but this daily documentation will be helpful for processing cross-asset market signals vis-a-vis war developments along the way.