The financial markets remain gripped by anxiety over rising tensions in the Middle East, and concerns that the Israel-Hamas war could drive up oil prices, fuelling inflation. Markets across the Asia-Pacific region are in the red today, with Japan’s Nikkei losing 1.85%, and China’s CSI 300 down 1.9%. That follows a sell-off yesterday in Europe, and then losses on Wall Street. Gold hit its highest level since 1 August yesterday, touching $1,962 per ounce, as investors favoured traditional safe-haven assets. Oil jumped too, with Brent crude hitting $93 per barrel on Wednesday, before slipping back to $91 this morning. Investors have also been driving down the price of government bonds. This pushed the yield, or interest rate, on 10-year US government bonds to their highest since 2007, early in the financial crisis. Global investors are focused on the Middle East, where US president Joe Biden yesterday met with his Israeli counterpart, Benjamin Netanyahu – who has pledged to allow aid into Gaza via Egypt. But Biden’s meetings with leaders from the Arab world were cancelled, following the explosion at Gaza’s al-Ahli Arab hospital. Risky assets face the double risks of higher real yields and increasing geopolitical tensions, says Mohit Kumar, chief economist for Europe at investment bank Jefferies. He told clients: "Geopolitical risks moved up a notch [yesterday] as Biden’s peace visit was snubbed by a number of Arab countries. Peace efforts are ongoing with the UK’s PM expected to make a visit to the region." Rating agency Standard & Poor’s fears that the crisis could create a new inflationary shock, and hurt global growth, if it escalates. In a new report it warned:“Even in the absence of a material energy supply shock, the evident sensitivity in energy prices to recent events indicates that some inflationary pressures could persist through the northern hemisphere winter.” The agenda • 8.30am BST: Bank of Indonesia sets interest rates • 1.30pm BST: US weekly jobless claims • 5pm BST: Federal Reserve chair Jerome Powell speaks at the Economic Club of New York We’ll be tracking all the main events throughout the day ...
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