The surprise attack on Israel by Hamas weighed on shares of global companies with local connections, including chipmakers and software providers, as investors fretted that conflict could escalate.
(Bloomberg) — The surprise attack on Israel by Hamas weighed on shares of global companies with local connections, including chipmakers and software providers, as investors fretted that conflict could escalate.
The assault has sparked fresh concern about geopolitical risks at a time when global financial markets were already grappling with the impact of higher interest rates and the slowdown in China’s economy. Oil prices surged while US stock-indexes dropped.
“The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Nerves are showing signs of being frayed again, just as investors had started to breathe a sigh of relief that the US might be heading for a softer landing.”
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In US markets, both the S&P 500 and the Nasdaq 100 edged lower. Broad regional stock indexes in Asia and Europe were little changed. Markets in Japan, South Korea and Taiwan were closed for a holiday, while a typhoon interrupted trading in Hong Kong.
Here are some global themes to watch:
Technology
Semiconductor stocks from Nvidia Corp. and Applied Materials Inc. were dragged down amid concern over the possible impact on Intel Corp.’s plans. Intel in June agreed to build a new manufacturing plant in Israel, as part of a push by the firm and its peers to diversify their production sources. Prime Minister Benjamin Netanyahu had at the time placed the deal’s value at $25 billion.
Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. may see an impact when local trading resumes.
Datadog Inc. and other cybersecurity stocks will also be in focus due to the likely impact on Check Point Software Technologies Ltd., which is based in Tel Aviv. US-listed Check Point dropped 1.4%, while Datadog slid 3.7%.
Shares of Indian software exporters with operations in Israel, including Infosys Ltd., Tech Mahindra Ltd. and Wipro Ltd., slipped less than 0.6%.
Travel
Airline stocks slid Monday after some companies halted flights with Israel. The Bloomberg World Airlines Index shed as much as 3.1% in US trading.
Delta Air Lines Inc., United Airlines Holdings Inc. and American Airlines Group Inc. shares all fell as the group canceled services to Tel Aviv. European companies Deutsche Lufthansa AG, Air France-KLM and budget specialist Wizz Air Holdings Plc. also canceled flights to Tel Aviv, sending shares down more than 4%.
Asian carriers including Air India Ltd. and Cathay Pacific Airways Ltd. also suspended service to Israel, shares of the latter fell as much as 1.6%.
Declines weren’t limited to companies with suspended flights. Iberia Express parent IAG SA fell as much as 6.1%. Ryanair Holdings plc fell 3.6%.
Generic Drugs
Global generic-drug makers such as India’s Dr. Reddy’s Laboratories Ltd. and Lupin Ltd. may warrant attention due to any potential impact on sector bellwether Teva Pharmaceutical Industries Ltd.
Stock performance in the sector was mixed. Teva fell 4.6%, while Dr. Reddy’s increased in Mumbai. India’s Sun Pharmaceutical Industries Ltd., which owns 72% stake in Israel’s Taro Pharmaceutical, shed 0.4%.
Oil, Shipping
While Israel isn’t a big producer of oil, the rest of the region is, so the conflict is pushing up the price of the commodity and the stocks linked to it.
West Texas Intermediate crude climbed 4.3% as a war-risk premium returned to markets. Shares of Asian producers like Australia’s Woodside Energy Group Ltd. and Santos Ltd. gained more than 3% each, while Shell Plc and BP Plc both advanced about 2.5% in London. In US trading, Exxon Mobil Corp. and Chevron Corp. rallied more than 2.6%.
Energean Plc was a notable exception to the energy rally, falling 18% in London. The natural gas producer’s flagship production and development assets are fields off the coast of Israel.
Defense
Defense stocks were mostly higher Monday following the conflict. The S&P 500 Aerospace & Defense Index rose 5.1% in the US, boosted by gains in Northrop Grumman Corp., Lockheed Martin Corp. and L3Harris Technologies Inc. General Dynamics Corp. also rose as much as 9.2%, while RTX Corp. and Leidos Holdings Inc. gained more than 3%. BAE Systems Plc gained as much as 5.2% in London.
Israeli company Camtek Ltd led declines, falling as much as 12%, while CyberArk Software Ltd. as much as 9.1% before paring almost all losses.
Israel Revenue
Companies that count Israel among their major markets will were on traders’ radar. These include: China’s Nanjing Xinjiekou Department Store Co., US-listed Taboola.com Ltd., Kenon Holdings Ltd., and Taiwan’s Lanner Electronics Inc.
Nanjing Xinjiekou fell 0.9%. In Singapore, Israeli VC firm Trendlines Group Ltd. fell 2.2%. India’s Adani Ports Ltd., which owns the Haifa port, slid nearly 5%.
Gold
Meanwhile, Asian gold miners such as Australia’s Newcrest Mining Ltd. rose with the precious metal on haven demand as tensions in the Middle East ramped up. US miner Newmont Corp. was little changed.
–With assistance from Jackie Edwards, Ashutosh Joshi, Ishika Mookerjee and Sydney Maki.
(Updates stock performance throughout, adds US trading and sectors)
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