• Hamas seems to be guided by its own weakening domestic position, while Iran and Hamas likely have the objective to derail the ongoing rapprochement between Saudi Arabia and Israel. The conflict may last for the next few weeks, but is likely to remain localised.
• Geopolitical implications of the conflict: There will likely be ramifications for Israel-Iran, Saudi Arabia-Israel and US-Saudi relations. A more aggressive stance from Israel is expected as it tries to control the conflict and becomes more hawkish on Iran. In addition, the West, particularly the US (as some hostages are US citizens), may be tempted to temporarily shift focus away from Ukraine in terms of military aid. Should the knock-on effect of the attack lead to higher oil prices, this would be negative for US president Joe Biden in an election year.
• On markets: While we do not expect a major impact as long as the crisis remains local, we see some risks for oil should the conflict take a broader dimension. 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.

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