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Headlines

Global market reaction to two years of war in Gaza

Published by Global Banking and Finance Review

Posted on October 9, 2025

Featured image for article about Headlines

By Marc Jones

LONDON (Reuters) -Below are five charts showing the volatile response of global financial markets to the war between Israel and Hamas over the last two years.

1/TAKING STOCK

Israeli stocks and those of the world's big weapons makers have surged since the October 7, 2023 attacks.

Defence stocks were already on the rise due to Russia's invasion of Ukraine and rising risks elsewhere, but they accelerated sharply as the conflict in Gaza grew and are now more than 120% higher than they were when Hamas attacked Israel.

MSCI's Israel stocks index is up more than 80% too - roughly 30 percentage points more than the main global stocks benchmarks - the shekel is up against the dollar following the greenback's slump this year, while some of Israel's banks have kept up with the defence rally.

2/CREDIT RATING CUTS

The cost of the war meant Israel suffered its first ever credit rating downgrades in 2024, starting with Moody's four months after the Hamas attacks, followed by S&P in April and Fitch in August that year.

At the depths of conflict, credit default swap markets - where investors go to hedge risk - even priced the possibility that Israel could lose its investment grade status and get downgraded to the 'junk' category of sovereign debt.

Those worries have receded this year, though, and CDS prices currently point to no further downgrades.

3/ECONOMIC DAMAGE

Israel's $580 billion economy was also slowed drastically by the war. Last October the country's finance ministry estimated it had already cost it around 14 billion shekels ($3.75 billion), although that will be far higher now.

Economic growth ground to a near standstill last year but it is expected to be a more robust 2.5% this year according to the country's central bank, and could be more than 5% next year if a "peace dividend" materialises.

4/OIL AND GAS

Oil rose above $90 a barrel and European natural gas prices saw their biggest jump in six months in the immediate aftermath of the 2023 Hamas attacks, but the market quickly shrugged it off and Brent dropped back to $75 by the end of that year.

Escalating tensions with Iran then pushed oil higher again in early 2024. That reversed too when it turned into little more than a skirmish although there was a more significant, albeit also brief, spike this year when U.S. forces struck Iran’s three main nuclear sites.

5/GOLD RUSH

Safe-haven gold rose nearly 3% after the Hamas attacks. It was its biggest weekly jump in six months, and gold hasn't looked back since.

Though there are plenty of additional reasons driving it now too, the fact is that move marked the start of a remarkable 120% rally that has just pushed bullion past $4,000 a troy ounce for the first time.

(Reporting by Marc Jones; additional graphics by Sumanta Sen and Pasit Kongkunakornkul; Editing by Hugh Lawson)