The surprise attack on Israel by Hamas weighed on shares of global companies with local connections, including chipmakers and software providers, as investors fretted that the conflict could escalate.
(Bloomberg) — The surprise attack on Israel by Hamas weighed on shares of global companies with local connections, including chipmakers and software providers, as investors fretted that the conflict could escalate.
Saturday’s assault has sparked fresh concern about geopolitical risks at a time when global financial markets already were grappling with the impact of higher interest rates and the slowdown in China’s economy. Oil prices surged while US stock-index futures dropped.
“The attack on Israel could lead to increased volatility in markets and make investors more risk-averse in the near term,” said Manish Bhargava, a fund manager at Straits Investment Holdings Pte. “If geopolitical tensions flare up in the Middle East and there is disruption to oil production or transportation, then it could lead to much higher oil prices.”
READ: Asian Stocks Mixed as China Slips, Energy-Heavy Markets Rise
Broad regional stock indexes in Asia and Europe were little changed. Markets in Japan, South Korea and Taiwan were closed for a holiday, while a typhoon interrupted trading in Hong Kong.
Here are some global themes to watch:
Semiconductor stocks from Nvidia Corp. and Applied Materials Inc. were dragged down in premarket trading amid concern over the possible impact on Intel Corp.’s plans. Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. also may see an impact when trading resumes.
Intel in June agreed to build a new manufacturing plant in Israel, as part of a push by the firm and its peers to diversify their production sources. Prime Minister Benjamin Netanyahu had at the time placed the deal’s value at $25 billion.
Datadog Inc. and other cybersecurity stocks will also be in focus due to the likely impact on Check Point Software Technologies Ltd., which is based in Tel Aviv. US-listed Check Point dropped 4.4% in premarket trading.
Shares of Indian software exporters with operations in Israel, including Infosys Ltd., Tech Mahindra Ltd. and Wipro Ltd., slipped less than 0.5%.
Global generic-drug makers such as India’s Dr. Reddy’s Laboratories Ltd. and Lupin Ltd. may warrant attention due to any potential impact on sector bellwether Teva Pharmaceutical Industries Ltd.
Stock performance in the sector was mixed. Teva was little changed in Tel Aviv, while Dr. Reddy’s rose in Mumbai. India’s Sun Pharmaceutical Industries Ltd., which owns 72% stake in Israel’s Taro Pharmaceutical, was little changed.
While Israel isn’t a big producer of oil, the rest of the region is, so the conflict is pushing up the price of the commodity and the stocks linked to it.
West Texas Intermediate crude climbed 3.4% as a war-risk premium returned to markets. Shares of Asian producers like Australia’s Woodside Energy Group Ltd. and Santos Ltd. gained more than 3% each, while Shell Plc and BP Plc both advanced about 2.5% in London. In US premarket trading, Exxon Mobil Corp. and Chevron Corp. rallied more than 2%.
Energean Plc was a notable exception to the energy rally, falling 18% in London. The natural gas producer’s flagship production and development assets are fields off the coast of Israel.
Companies that count Israel among their major markets will were on traders’ radar. These include: China’s Nanjing Xinjiekou Department Store Co., US-listed Taboola.com Ltd., Kenon Holdings Ltd., and Taiwan’s Lanner Electronics Inc.
Nanjing Xinjiekou fell 0.9%. In Singapore, Israeli VC firm Trendlines Group Ltd. fell 2.2%. India’s Adani Ports Ltd., which owns the Haifa port, slid 5.7%.
The conflict also bolstered shares of defense companies. BAE Systems Plc gained as much as 5.3% in London, while Lockheed Martin Corp. and RTX Corp. advanced about 4.5% each in the US.
Meanwhile, Asian gold miners such as Australia’s Newcrest Mining Ltd. rose with the precious metal on haven demand as tensions in the Middle East ramped up. US miner Newmont Corp. climbed 1.8%.
–With assistance from Jackie Edwards, Ashutosh Joshi and Ishika Mookerjee.
(Updates to stock performance throughout)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.