2023-10-10 15:19:59
A surprise attack by Hamas on Saturday morning could pose a serious geopolitical risk to global financial markets. The conflict in Israel could push investors towards gold, cryptocurrencies and safe haven funds. The conflict between Israel and the Palestinian terrorist organization Hamas is primarily focused on the Gaza Strip. Deep-rooted historical, territorial and ideological differences are currently dominated by a state of war in the cycle of violence, cease-fires and international mediation efforts. Geopolitical events in the Middle East have always had a significant impact on financial markets, and the latest war-torn conflict is no exception. As tensions rise, market participants are also becoming more cautious. Investor concerns are naturally heightened, leading to a shift towards safer investment options. The attractiveness and availability of safe-haven financial instruments As a result of the geopolitical anxiety heightened by the incident, demand for safe-haven assets such as gold and the US dollar has increased. The US dollar tends to strengthen in response to global unrest. This is due to the stability of the asset, confidence in the US economy and financial markets, and potential monetary policy actions by the Federal Reserve, which could reduce the value of other currencies against the dollar. This is why the dollar’s appeal to investors seeking safety during global incidents increases. This is also confirmed by Peter Cardillo, chief market economist at Spartan Capital Securities: “When there is international turmoil, the US dollar strengthens.” Cardillo also pointed out that it can be useful to include gold in our investment portfolio, because according to the economist, it can provide effective protection during times of global instability. At the same time, investors are also looking at cryptocurrencies as an attractive option, with demand for them potentially outstripping traditionally safe-haven investments such as gold and the US dollar. So, amid rising geopolitical risks, cryptocurrencies may represent a new horizon in financial security and protection. Brian Jacobsen, chief economist at Annex Wealth Management, said of the situation in Israel: “Whether or not this ends up being a huge market event depends on how long it lasts and whether others get sucked into the conflict.” How cryptocurrencies can profit from conflicts in the Middle East? The ongoing geopolitical conflicts in the Middle East, especially between Israel and Hamas, may inadvertently have a number of potential positive effects on cryptocurrencies. First, heightened geopolitical tensions could act as a catalyst for increased demand for digital assets. Cryptocurrencies such as Bitcoin are increasingly viewed as “digital gold” due to their finite supply and decentralization, making them an attractive option for investors seeking refuge in uncertain times. When assets traditionally considered safe, such as gold and the US dollar, are challenged, cryptocurrencies can serve as an alternative store of value. Second, the conflict in Israel underscores the utility of cryptocurrencies in facilitating cross-border transactions and providing individuals affected by political turmoil with access to their financial assets. In regions with strict capital restrictions or unstable financial systems, cryptocurrencies offer an opportunity to preserve wealth and conduct international trade outside of the traditional banking system. As a result of the conflict, the need for borderless and censorship-resistant financial instruments came to the fore, which confirms the importance of the financial integration of cryptocurrencies and highlights their resilience in geopolitical tension zones.
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