President Donald Trump’s suggestion that the U.S. could take ownership of the Gaza Strip has sent shockwaves through the political world. Relative calm in financial markets suggests traders think it is unlikely to happen.
Trump proposed the U.S. taking over Gaza late Tuesday during a press conference alongside Israel’s Prime Minister Benjamin Netanyahu. Trump said the U.S. would “own” Gaza and “do a job with it”.
Such a move would upend decades of American foreign policy, involve it in a development policy that Trump officials have said could take 10 to 15 years, and increase the possibility of the U.S. needing to send armed forces to the Middle East.
“Markets are treating Trump’s announced intention to take over the Gaza Strip and evacuate Palestinians to neighbouring countries with skepticism. Should we see hints that the US is planning to deploy troops in the Middle East, the market implications can be risk-off, oil-positive and dollar-positive, as Arab nations should firmly oppose the move,” ING analyst Francesco Pesole wrote in a research note.
Saudi Arabia on Wednesday dismissed the proposal, saying its commitment to a Palestinian state in Gaza and the West Bank was “firm and unwavering.” Egypt, Jordan, the United Arab Emirates and Qatar have rejected the eviction of Palestinians from Gaza, while the Palestinian Authority and Hamas say they wouldn’t support an evacuation.
Crude oil prices were falling around 0.8% in early trading on Wednesday. However, gold was rising 0.7% to $2,896.60 an ounce. Futures for the precious metal hit a fresh record for the fifth consecutive session.
“Maybe some fresh geopolitical premium [is] being priced in to the metal in the wake of President Trump saying the US should take over Gaza,” said Neil Wilson, an analyst at TipRanks.