Israel war spooks markets, “avoid knee-jerk reactions”

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Oil prices surged by 5% following Hamas’ unexpected attack on Israel over the weekend, but investors need to avoid knee-jerk reactions, warned the CEO of a leading independent financial advisory and fintech.

The warning from Nigel Green of deVere Group came as investors digest the news that the Palestinian Islamist group Hamas on Saturday launched the largest military assault on Israel in decades, killing hundreds of Israelis and triggering a wave of retaliatory Israeli air strikes on the Gaza Strip.

Heading into the fourth day, the death toll rose to 1,500, while the US said it was sending warships to the region.

“The events in this region are directly impacting financial markets worldwide, which, as ever in times of increased volatility, is prompting investors into selling off riskier parts of their portfolios, such as stocks and some currencies,” said the deVere CEO.

“Oil has a disproportionate impact on financial markets due to its pivotal role in the world economy, its interconnectedness with various sectors, and its potential to influence broader economic conditions and investor sentiment.

“I would urge investors to avoid knee-jerk reactions to the oil price surge and geopolitical tensions that are creating the market turbulence,” Green warned.

Investors are likely to profit by sitting still and not selling and then having to buy back at higher prices, he explained.

Use volatility

“Indeed, savvy investors, including the likes of Warren Buffett, will likely use the volatility and lower entry points to top-up their portfolios for the long-term with high quality stocks that have robust fundamentals.”

Green said investors need to ensure their investment portfolio is diversified across various asset classes, such as stocks, bonds, and commodities.

“Diversification is your best weapon to mitigate the risks associated with geopolitical events.”

He also recommended to keep a close eye on energy-related stocks and companies, as they are likely to be directly impacted by the fluctuating oil prices. Companies involved in oil production and exploration may benefit from higher prices, while industries that rely heavily on energy consumption may face challenges.

“While short-term market fluctuations can be unsettling, it’s essential to maintain a long-term perspective when making investment decisions,” he concluded.

“Historically, markets have rebounded from geopolitical crises, and a well-constructed portfolio can weather such storms.”