Gaza assassination could cause Significant Mid-East Escalation – Dollar

Israel killed the chief of staff of Hamas, which controls the Gaza strip. The  assassination  of Ahmed Jaabri is a significant escalation in the recent clashes between the sides, and it could turn into a full scale war in Gaza.

Oil prices are already higher, and safe havens currencies such as the dollar and the yen could rise on further escalation.

In the past few weeks, Hamas and other  Palestinian organizations have  launched quite a few rocket attacks on cities and towns in the south of Israel. A ceasefire already seemed close, with only the Salafists refusing to lay down their arms. However, fresh attacks led to a significant move by Israel.

The  assassination  of Jaabri is the first strike in Israel’s new operation called “Pillar of Cloud”. Hamas already said that this is a full scale war, which will also include suicide attacks.

Israeli PM Benjamin Netanyahu is seeing a drop in support for his Likud party, and Defense minister Ehud Barak is also on the verge of losing his seat in parliament. Elections are due on January 22nd.

Hamas is in need of new allies, after its  Damascus  headquarters and ties to the Syrian regime are problematic with other Arab nations.

More significant violence is expected to erupt in the coming days. The news of the assassination already pushed the price of oil higher.

Mid-East violence is usually positive for safe haven currencies such as the dollar, the yen and the Swiss franc. With the peg of the franc to the euro, this currency is out of the game. In Japan, political uncertainty weighs on the yen.

So, the dollar could be the winner, as long as oil prices don’t get too high.

Further reading:  Israeli Elections Likely to Supply Calm on Iran Issue