Israel-Hamas: Triangulating the Likelihood of a Ground Invasion
"The enemy is a disease that has no cure." - From a note pulled from a dead Hamas fighter.
Discussion
The direction of financial markets with respect to Israel-Hamas hinges on whether Israel moves forward with its invasion of Gaza, as Iran & Co have made it clear that the war will escalate if Israel invades. This is why every positive headline about hostage negotiations leads to a rally in equities and a decline in war hedges (oil and gold). With supposedly ~200 hostages held by Hamas, the calculus for financial markets is rather straightforward: If Israel holds off on a ground invasion until Hamas releases all 200, and Hamas releases two hostages every week, that’s 100 weeks of market-positive delay in the conflict. Financial markets and Hamas terrorists are ruthlessly cynical - both understand this calculus.
So, the question of the day is: Will Israel actually wait until all 200 are released before proceeding with its ground invasion?
Three things:
First and foremost this is existential for Israel. Hamas “wants every Jew dead” and Israel knows it. It must invade.
The war on Hamas is going largely to plan and Israeli ground troops are chomping at the bit to invade.
Third, hostage negotiations are a ploy to allow the US and Israel to prepare for the inevitable escalation once Israel invades.
Odds are high the ground invasion is launched by the end of this month, at the latest.
This is Existential
In earlier Israel-Hamas write-ups I highlighted the interview below with Israeli citizen and reporter Haviv Rettig Gur as evidence of just how committed the Israeli populace is to eradicating Hamas.
I also highlighted the following quote from a recent Bloomberg article:
“Israel is afraid its citizens will leave if the risk of another attack like this remains.”
Triangulating (word of the day) this quote with Rettig Gur’s interview above, simply put, Israel has a duty to its citizenry to eviscerate Hamas.
Triangulating further, just today the IDF released via Xwitter a letter pulled off of a Hamas fighter that said:
“The enemy is a disease that has no cure.”
As the IDF officer that read the letter states in the video, Israel-Hamas is not an “Israel vs. Palestine” issue, but rather an issue of “a crime against humanity.”
This is According to Plan
Early on Monday I wrote about Israel’s multi-phase plan of attack as outlined by IDF Major General Retired Yaakov Amidror. That interview was behind a paywall, but I subsequently found the public video below where he went into even greater detail. Zero equivocation. None. The invasion is happening.
In an interview today, foreign affairs analyst Tim Marshall goes into extensive detail about the tunnel system Hamas has built and how Israel will approach it. He also made the point that the number of IDF troops amassed at the Gaza border has an economic cost to Israel given the amount of reserves pulled from their daily occupation. He also believes the invasion is imminent.
This is a Ploy
Lastly, the majority of evidenced points to the hostage negotiations being a ploy to allow the US and Israel to better prepare for a ground invasion (see here, here, and here). Once Israel invades, it’s highly likely that Lebanon Hezbollah (LH) moves. US assets are already under attack across the Middle East and the Biden administration is scrambling to ramp up military reinforcements in the region - all the more once LH engages. And as Yaakov Amidror discusses in the interviews cited above, the more Israel is able to do via air in Gaza the more Air Force firepower it will have to defend the North while it’s engaged on the ground in Gaza.
Adding it all up, I would be very surprised if Israel does not have boots on the ground in Gaza en masse by the end of this month. While the price of oil will act as a decent “tell” over the course of the war, I continue to believe the price of gold is the purest indicator for assessing the direction of the war, and it continues to hold its post-October 7 gains despite a move up in rates and the USD…an ominous signal that runs counter to the broad market narrative that the war is a regional conflict likely to remain contained.