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The aftermath

The consequences of the conflict in Israel after the attack from Hamas are statrting to emerge. So far, there has not been panic and markets are adjusting orderly. As expected, crude oil is going up around 4%, although during the last conflicts in the region, oil shocks were mostly muted. Perhaps due to fracking in the U.S. (less important today) and certain independence from Middle East in terms of oil imports have smoothed market responses to conflicts in the region. However, strategic petroleum reserves, the oil piggy bank the US built after the oil crisis on the 70’s, are almost depleted. If the conflict escalates and lengthens, the impact on the U.S. could be significant, through inflation. Furthermore, Israel is an historical ally of the U.S. and consequently, full fledged support from military, financial and intelligence standpoint is expected. At a moment where the deficit is skyrocketing, will the U.S. cut the aid to #ukraine? Or will it increase the deficit even more to support both wars?

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