David McNamara: Markets at odds on outlook for Middle East conflict

With evidence of some market complacency regarding the potential economic impact from the current conflict, interest rate markets tell a very different story

Smoke rises from Israeli shells attacking the village of Qlaile in south Lebanon at the weekend. Picture: AP Photo/Hussein Malla

Following a further week of uncertainty in relation to the Middle East conflict, including hints of a ceasefire deal, markets have continued to grind lower, and oil prices move higher. While energy futures markets continue to price in a quick fall in oil prices on the back of a cessation in hostilities, the reality of the infrastructure damage in the Middle East is beginning to emerge.

Last week, the French government indicated 30% to 40% of Gulf refining capacity has been damaged or destroyed by Iran's retaliatory strikes, leaving a shortage of 11m barrels a day on global oil markets that could take up to three years to restore, and several months to restart those that were shut down since the beginning of the war.