Israel-Gaza conflict worsening

Event

On Saturday 7 October, Hamas coordinated an aerial, maritime and territorial incursion from the Gaza Strip into southern Israeli territory in an unprecedented manner. Hamas militants targeted the music festival Supernova as well as cities, agricultural communities (kibbutz) and military bases near the border. The attacks have led to an important number of casualties. Moreover, many civilians and military personnel have been taken hostage and transferred to the Gaza Strip. On Sunday 8 October, the government guided by prime minister Netanyahu formally declared that the country was at war and the Israel Defense Forces (IDF) have heavily bombarded the Gaza Strip in response to the attacks. On October 11, a unity government and a war cabinet were formed.

Impact

Saturday 7 October’s events are unprecedented in the Israeli-Palestinian conflict in terms of complexity and, most importantly, in terms of the organised ground offensive into Israeli territory by Hamas militants. The 7 October onslaught is deemed one of the deadliest in Israel’s history and it led to the most severe deterioration of the conflict in years. It also raised fears that the conflict could deteriorate further and develop into a more regional dimension. It is reported that the Israeli authorities might authorise a ground offensive into Gaza’s territory, risking important civilian and military casualties. Analysts fear that Israel’s military operations into the Gaza Strip would fuel unrest in the West Bank and prompt Hamas’s allies – most notably the Iran-backed Lebanese political and militant group Hezbollah – to participate in the conflict. The participation of Hezbollah could escalate the conflict, as the group is more militarily equipped than Hamas, and would open a new conflict zone in northern Israel.

The conflict could have broader implications. In geopolitical terms, the Israeli-Palestinian conflict complicates the current détente between Israel and its Arab neighbours under the Abraham Accords. The trilateral negotiations between Israel, the USA and Saudi Arabia for an Israeli-Saudi détente could especially be impacted. From an economic point of view, the conflict is adding volatility to oil markets and could impact tourism in the region, which could add pressure on fiscally strained countries such as Egypt and Tunisia.

For the moment, the conflict appears largely concentrated near the Gaza Strip – despite confrontations in the north of the country – and the Israeli authorities declared to have secured the Gaza border and that they largely retook control of the Israeli territories attacked by Hamas on Saturday. In this context, and given Israel’s important military capacity and US support, Credendo maintains Israel’s political risk ratings at their current levels for the time being. Nonetheless, any escalation of the conflict could prompt Credendo to review its country risk classifications.

Analyst: Andres Hernandez Cardona – a.hernandezcardona@credendo.com