The Rafah offensive will either stop or escalate the war. In the upcoming weeks, the world will watch and wait for prime minister Benjamin Netanyahu’s decision on the now infamous Rafah offensive. Here are two scenarios we deem as the most likely.
Scenario one: the threat of the offensive materialises and with mounting pressure from Egypt, the US and its own people, Hamas accepts a short-term ceasefire in exchange for hostages. This scenario, although providing immediate relief, would see tensions flare again once the agreed upon term ends. There is also a small chance that with an existing ceasefire in place and heightened global pressure, particularly from the US, Israel could be forced to prolong the ceasefire or even negotiate a longer-term solution.
Scenario two: Hamas, unwilling to accept anything other than a permanent ceasefire, continues to resist and Israel commences ground operations in Rafah escalating tensions to their highest level since 7 October. In this scenario, a global wave of condemnation would barrage Israel, which would, despite trying to safeguard civilian life, ultimately not be able to avoid an elevated number of casualties. The Rafah offensive, particularly because of Ramadan, risks seeing tensions flare up in the region and emboldening militant groups, such as the Houthis or Hezbollah, reigniting fears of a war on two fronts. This scenario could also compromise Israel’s relationships with Egypt if the nation is exposed to an influx of refugees to Sinai or if Hamas militants flee to Egyptian territory. The US, which has already made its stance clear, would be forced to make a decision that could also compromise relations with Israel.
Saudi Aramco’s finance chief has stated that the firm may sell bonds this year. CFO Ziad Al-Murshed, said at a conference in Riyad that the company is contemplating issuing longer-dated debt as the “markets are becoming more stable” and Aramco is “always prioritising longer-term over short-term” maturities. The oil producer currently has 11 outstanding USD-denominated bonds totalling USD 24.5 bn with its current longest maturities being the 2050 and 2070, which currently yield c. 5.6%.
This week, US CPI data (Tuesday) and PPI data (Thursday) will be the key drivers of MENA spreads as the markets have now fully priced in a June rate cut and an upward shock in the CPI print risks a repricing. The CPI is currently expected to rise 0.4% MoM and 3.1% YoY. MENA nations will also be publishing their CPI figures notably Dubai (Friday), Saudi Arabia (Wednesday), Qatar (Friday) and Israel (Friday). Israel will also publish current account balance (Tuesday), trade balance (Wednesday), and unemployment figures (Monday 18th).