The United Nations Security Council convened an emergency session in New York on Wednesday to address the escalating tensions in the Middle East, specifically the situation between Israel and Lebanon, and the potential for an all-out war.
Israeli Ambassador Danny Danon addressed the council, calling Iran’s missile strike on Israel the “largest” in the country’s history. He emphasized the need for the council to understand the precarious situation Israel faces, highlighting that holy sites were targeted in the attack. He noted that Israel’s defense systems intercepted most of the 200 missiles launched on Tuesday, but the threat remains very real. “The world watched silently as Iran funded and directed attacks against us for the past year, arming and training their proxies for decades,” Danon added. “Now the world must step up. Iran must pay a heavy price for this attack. Anything less is complicity.”
The meeting comes amidst reports of Israeli troops battling Hezbollah militants inside Lebanon. This ground operation, launched as a retaliation for Iran’s attack, has resulted in at least eight fatalities for the Israeli army, as reported by CNN. The conflict has sparked concern about the potential for a wider regional war.
Iran’s missile attack followed the recent killing of Hezbollah leader Hassan Nasrallah. Hezbollah, a terrorist organization according to the United States, has received significant support from Iran since its formation in the early 1980s. The group is seen by Tehran as an ally in expanding its influence in the Middle East.
The White House has pledged consequences for Iran’s actions. President Joe Biden reiterated the United States’ unwavering support for Israel, stating, “Make no mistake, the United States is fully, fully supportive of Israel.”
The attack has significantly impacted global markets. Major stock indices dipped following the missile attacks, coupled with Tuesday’s job and economic data. The S&P 500 saw a slight decline, while the Dow Jones and the Nasdaq experienced minimal changes.
Financial markets reacted as expected to the heightened geopolitical tensions, with risk aversion prevailing. Matthew Ryan, head of market strategy and global financial services at Ebury, explained, “Financial markets have reacted as one would expect to the heightened geopolitical tensions in the Middle East, with a bout of risk aversion sweeping through asset classes in the past 24 hours.” Equities are trading lower, and safe-haven currencies have outperformed others. This includes the U.S. dollar, which has been buoyed by hawkish comments from Federal Reserve Chair Jerome Powell.
The conflict also raises concerns about inflation and central bank policy. Higher oil prices could hinder the U.S. Federal Reserve’s efforts to control inflation, potentially delaying future interest rate cuts.
Ryan expressed investor concerns about the potential disruption of oil supplies due to Israel’s retaliation. Iran is a major oil producer, ranking seventh globally. The price of gold and oil surged following the attack, with the United States Oil Fund USO trading slightly higher on the day and the SPDR Gold Trust GLD experiencing a minor decline. Ryan believes the ramifications of the conflict, though concerning, are unlikely to be as severe as those following Russia’s invasion of Ukraine.
The escalating tensions have also spurred an increase in defense stocks, with the IShares U.S. Aerospace & Defense ETF ITA, the Invesco Aerospace & Defense ETF PPA, and the SPDR S&P Aerospace & Defense ETF XAR all trading higher on Wednesday. The US has also increased its military presence in the Middle East amid the rising tensions with Iran.
The UN Security Council meeting is ongoing, and the situation remains volatile. The world watches with concern as the conflict unfolds, hoping for a peaceful resolution before the situation further escalates.
