Core Viewpoint - The article discusses the unexpected rise in Israeli stock markets following the U.S. attack on Iranian nuclear facilities, highlighting the market's reaction amidst geopolitical tensions in the Middle East [1][5]. Market Performance - On the opening of the market on the 22nd, the Israeli TA-125 index rose by 1.52%, reaching a historical high, while the TA-35 index increased by 1.41% [2]. - Other Middle Eastern markets also showed positive performance, with the Saudi TASI index rising nearly 1% and the Qatar index increasing over 1% [3]. Factors Driving Market Sentiment - The surge in Israeli stocks is attributed to several factors, including perceived military successes by Israeli defense forces, leading to optimism about a quick resolution to the conflict [2]. - There is speculation about potential breakthroughs in hostage negotiations and a growing optimism regarding normalization of relations with Saudi Arabia [2]. Oil Price Expectations - Investors are anticipating that the conflict may lead to higher international oil prices, which would benefit oil-producing countries [3]. - The article notes that the attack could initially push oil prices higher, with potential implications for global inflation and consumer confidence [5][6]. Economic Impact Scenarios - Oxford Economics simulated scenarios regarding the conflict's impact on oil prices, predicting that in the worst-case scenario, prices could rise to around $130 per barrel, potentially driving U.S. inflation to about 6% by year-end [6]. - The article emphasizes that rising inflation could complicate monetary policy, reducing the likelihood of interest rate cuts in the near term [6]. Historical Context - Historical data suggests that stock market reactions to Middle Eastern conflicts can be short-lived, with markets often rebounding after initial declines [7]. - The article references past conflicts, indicating that the S&P 500 index typically experiences a slight decline in the weeks following a conflict but tends to recover and rise in the subsequent months [7]. Currency Market Reactions - The article discusses the complex effects of the conflict on the U.S. dollar, suggesting that initial safety-seeking behavior may strengthen the dollar, but the overall market reaction will depend on Iran's response and oil price movements [7].