Another day, another spike in geopolitical risk. A shooting incident in Israel has left one person dead, prompting the Foreign Office to issue an urgent advisory for British nationals to avoid the affected areas. The markets, as ever, are watching the headlines.
The pound sterling barely flinched, but the gilt yield curve steepened slightly as investors priced in a fresh dose of uncertainty. The human cost is tragic. The financial cost remains to be seen.
Capital flight from the region is a given, but the real question is whether this incident will trigger a broader repricing of risk assets. The Bank of England will take note, but for now, the fiscal hawks are more concerned with domestic inflation. The dollar, predictably, strengthened against the shekel.
The FTSE 100 shrugged off the news, more focused on energy prices and the looming recession. The Foreign Office has not yet used the phrase 'do not travel', but the recommendation is clear: steer clear. For the markets, this is a reminder that the world remains a dangerous place.
For the Treasury, it is a reminder that geopolitical shocks can derail even the most carefully laid fiscal plans. The cost of this incident in human lives is incalculable. The cost in market terms will depend on whether this is an isolated event or the start of a wider conflagration.
As always, the bottom line is this: uncertainty is the enemy of investment. And uncertainty, like violence, often comes without warning.
