Escalating Middle-East conflicts – The markets and the region react

Updated On: Jul 18, 2006

Israel’s five-straight day attacks against Lebanon have escalated tensions in the Middle East, amid volatile oil prices and nuclear tensions from troubled Iran andNorth Korea.

The Israeli air force launched a wave of bombing raids on the Hizbollah headquarters in south Beirut on July 15 and July 16, incapacitating the capital city’s international airport and cutting the main highway to Syria.

The Jewish state’s response – the most destructive since its 1982 invasion to expel Palestinian forces – began after Hizbollah raided the Israeli border last week, killing eight soldiers and taking two soldiers prisoner, and a day after the Shi'ite militant group's head, Sheikh Hassan Nasrallah, declared 'open war' on Israel as he emerged unscathed from an initial attack on his office on July 14.

The intensifying violence not only raised immediate concerns of oil supply disruptions, sending oil prices to top US$78 (S$124) per barrel on July 16, but longer term implications on its impact on the US economy.  Financial markets around the world has reacted to the crisis closing lower at the end of the week.

Markets in Southeast Asia have not been spared. 

While the conflicts may seem far away, an increasingly interdependent world, and the power of international media bring the conflicts right into the homes of millions in the region. 

The Muslim communities in Southeast Asia, primarily Malaysia and Indonesia, have condemned the Israeli attacks. Reuters reported that Malaysian Prime Minister Abdullah Badawi had written a letter to the permanent members of the United Nations Security Council urging them to take immediate action to stop the escalating Israeli violence. Foreign Minister Syed Hamid Albar also remarked that "their (Israeli) acts in Palestine and Lebanon show that they totally have no regard for others.”

At an impromptu press conference on July 14, President Susilo Bambang Yudhoyono declared that "Indonesia officially asks Israel to stop its military aggression immediately" and called on the United Nations and international community to take concrete measures together to prevent the conflict in the Middle East from escalating. Concerns were also voiced from Muslim organisations such as the Indonesian Muslim Brotherhood Association (Parmusi), the Indonesian Ulema Council (MUI) and the Islamic People`s Forum (FUI), condemning US support for Israel, whose actions are deemed ‘terrorist’.

Disapproval of Israeli aggression also achieved resonance from the ground, with demonstrations along the streets of BandungWest Java, and SurakartaCentral Java. The demonstrators set an Israeli flag on fire and called for a boycott of Israeli products by Muslim communities.


President Yudhoyono urges Israel to stop military attacks (Antara, 14 July 2006)

Mid-East unrest spooks markets (AP/AFP/The Straits Times, 15 July 2006)

Govt should more actively canvass intl solidarity for Palestine (Antara, 15 July 2006)

Israeli air force strikes southern suburb of Lebanese capital (AP/The Straits Times, 16 July 2006)

Middle East violence escalates (The Straits Times, 16 July 2006)

Bush-Putin divide over Mid-East violence surfaces at G-8 (AP/The Straits Times, 16 July 2006)

RI anger grows at Israeli attacks (Jakarta Post, 16 July 2006)

Palestinian foreign ministry in ruins, Israel steps up attacks (AP/AFP/The Straits Times, 17 July 2006)

Israel's 4-stage attack (The Straits Times, 17 July 2006)