The attacks this month on Israel have raised fears of a wider Middle East conflict, even of a third world war. Serious voices call this the most dangerous time in living memory, with threats looming from Russia, China, North Korea and Iran.

But financial markets have mostly been subdued in reaction to the conflagration brewing in Gaza. The benchmark US S&P 500 index has barely budged since the Hamas attack on October 7. Even stock markets closest to the battle zone, from Saudi Arabia to Egypt and the Gulf states, have experienced moderate pullbacks. There has been no rush to safety in bond markets, where prices have been falling, and little drama in oil prices either. 

It’s as if the markets think the conflict will fall short of the worst fears, as is often the case in geopolitical crises. In the days after the terror attacks in the US on 9/11, much cited as an analogue to 10/7 in Israel, America was on red alert for a follow-up. The S&P 500 fell by 12 per cent, the fall magnified no doubt by the fact that the US was six months into an eight-month recession. But that phase passed quickly — the S&P 500 would recover all its losses by October 11.