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In the middle of the weekend, Forex traders are tuning up to the news from the middle east: the war in Gaza has turned into a full scale conflict, with Israeli ground  forces now operating in the Gaza strip.

This is a major escalation in the Gaza war, that might make oil prices jump around the world. HAssn Nasrallah, head of the Lebanese Hizballah organization, expressed support for the Palestinians in Gaza, but didn’t make any move.

The key to flaring the middle east is in Nasrallah’s hands: if rockets are fired from Lebanon to northern Israel, this limited Gaza war could turn into a big turmoil in the middle east – pushing oil prices very high.  

Oil prices, which have lately collapsed could make a comeback: this could help the Australian dollar, Canadian dollar and the New Zealand dollar could gain from a spike in oil prices, while the USD could be hurt by them.

This escalating conflict in Gaza would also impact the GBP/AUD which has already lost ground on Friday, January 2nd.