Tit-for-tat strikes between Israel and Iran-backed Hezbollah have escalated sharply this week, raising fears of a wider regional conflict.
Israeli airstrikes in Lebanon killed over 550 people on Monday, prompting rocket attacks from Hezbollah on Israeli military sites. The fighting has forced flight cancelations, overwhelmed Lebanese hospitals, and displaced tens of thousands.
The UN warned the "extremely alarming" violence risks massive destabilization in the oil-producing Middle East without diplomatic efforts to de-escalate.
For investors, the renewed hostilities inject a fresh geopolitical risk premium. If prolonged, the conflict could disrupt regional energy supplies and weigh on markets already grappling with high inflation and recession risks. Defensive positioning may be warranted until tensions subside.
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