Amundi: ME conflict to have limited impact on markets

The impact of the recent Middle East conflict is likely to have a limited impact on markets, as long as it remains local, and will only be marginally positive for the defence and oil sectors, according to Amundi Asset Management.

In a media note, Vincent Mortier, group chief investment officer, and Anna Rosenberg, head of geopolitics at Amundi Investment Institute, have said that they expected the conflict to last for the next few weeks, but it “is likely to remain localised”, although there might be some risks for oil prices.

“While we do not change our inflation expectation for next year, the conflict nevertheless adds uncertainty to the inflation path, which is key to assess the economic outlook for the US,” they warned.

The conflict will be also slightly negative for some other sectors such as aviation and long-haul travel, given the complications to travel and flying over the region.

“In the US, it is seen as a catalyst to have the government shutdown risk lifted in order to vote for some additional help to Israel. However, the biggest risk is to oil prices as we think the ongoing relaxation of US sanctions on Iranian oil sales will become harder,” they warned.

Also, higher oil prices may also impact the inflation trajectory.

“If inflation falls as expected, the Fed will be accommodative, but if inflation doesn’t come under control, the Fed is unlikely to cut rates and this will increase the risk of a hard landing for the US economy in 2024.”