Grapevine

Israeli forces launch ground offensive in Lebanon as markets fear escalation

Israel has launched a ground incursion into Lebanese territory, with markets on edge over the possibility of a serious escalation in the conflict between the Jewish state, the Hezbollah militant group — and Iran itself. In a statement early on Tuesday, Israel's Defense Forces said they had begun "limited, localized and targeted ground raids" against targets in southern Lebanon that they say pose an "immediate threat to Israeli communities in northern Israel." The Israeli air and artillery forces are supporting the offensive, the IDF said. A senior White House official, meanwhile, told NBC News on Tuesday that the U.S. has seen indications Iran is preparing to "imminently" launch a ballistic missile attack on Israel. Any direct attack on Israel by Iran "will carry severe consequences for Iran," the official said. Oil prices moved sharply higher on Tuesday, with Brent crude futures with December expiry trading around $74.22 per barrel at 5 p.m. London time, up 3.45% on the previous settlement. The front-month November WTI contract was 3.7% higher at $70.72 per barrel.

Market impact

Conflict within Lebanon's home territory compounds a debilitating financial crisis that has gripped the country since 2019, after the hemorrhage of dollar liquidity. Israel's own economy, meanwhile, is showing the strain of multiple military campaigns. Its central bank is expected to hold interest rates — currently at 4.5% — unchanged until the second half of next year and trim its 2025 growth forecast as a result of the ongoing conflict, Reuters reported Bank of Israel Governor Amir Yaron as saying on Tuesday. Globally, markets have so far weathered nearly a year of unyielding conflict in the oil-rich Middle East, after Hamas' Oct. 7 attack triggered Israel's military campaign in the Gaza Strip and retaliatory cross-border strikes from Lebanon, along with Yemeni Houthi attacks disrupting commercial transit through the Red Sea. Historically sensitive to geopolitical tremors, oil prices have resisted long-term spikes, reined in by the specter of waning global demand and potential supply increases.