The world is facing a “new Middle East war” risk, the first in 50 years. The death toll from Palestinian militant group Hamas’ preemptive strike and subsequent Israeli retaliation that took place on Saturday local time has topped 700 and 400 respectively. The number of injured on both sides topped 5,000 and more than 120,000 people were displaced in Gaza. The situation appears to be escalating into a war that will also involve the United States and Iran after U.S. media reported that Iran approved the surprise attack, with Bloomberg warning that there is a risk the conflict could spiral into a more devastating proxy war. The strikes intensified on Monday as Hamas fired a rocket at the Ben Gurion Airport, Israel’s gateway to Gaza, while Israel fired more than 150 artillery strikes into Gaza, a Hamas stronghold.

The conflict has the potential to spill over into a ground war. Hamas militants have been holding hostages in a simultaneous guerrilla war, and the Israeli military believes it cannot counter Hamas with conventional air strikes. Israeli Defense Minister Yoav Gallant visited the southern town of Ophakim on Sunday, infiltrated by Hamas, where he vowed retaliation.

The United States and Iran are also increasingly involving themselves in the conflict. The U.S. launched military aid to Israel a day after Hamas’s surprise attack on Israel. U.S. Secretary of Defense Lloyd Austin ordered the dispatch of the world’s largest nuclear-powered aircraft carrier battle group, the USS Gerald R. Ford, to the Eastern Mediterranean near Israel. There is even testimony on Iranian government’s organizational involvement behind Hamas.

Tensions are also being felt in the global financial market. Oil prices spiked 5 percent on Monday morning on the Asian trading market as geopolitical risks emerged in the Middle East, a major oil-producing region. The price rise has slowed since but is still in the 3 percent range. The Cboe Volatility Index (VIX), which is dubbed “fear gauge” for U.S. stocks, surged as high as 10 percent at one point. Meanwhile, major European markets took a wait-and-see approach. They opened sharply lower but have since pared their losses to trade slightly higher. Russian and Polish stocks, on the other hand, were up 1-2 percent.

In Asia, the gold spot rate was up about 1 percent on Monday from the previous day’s close, and the U.S. Dollar Index was also up 45 basis points.

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