What factors are causing the decline of US stocks and the rise of oil and gold as the Israel-Hamas conflict intensifies?

During Friday’s morning trading, there was an increased aversion to risk as stocks took a sharp downturn, while gold and oil saw gains due to heightened tensions in the Middle East. Israel has ordered over 1 million people to evacuate from North Gaza to the southern part of the Gaza Strip as the military prepares to besiege the city, leading to rising tensions on the northern front. The University of Michigan Consumer Sentiment index experienced a worrying decline in October, accompanied by an unexpected increase in inflation expectations. Although banks reported third-quarter earnings that exceeded expectations, stock reactions were subdued due to deteriorating overall risk sentiment. Gold and oil were the top-performing assets, taking advantage of increasing geopolitical risks in the Middle East. The CBOE Volatility Index (VIX) rose over 22%, marking its strongest day in 2023. The S&P 500 fell 0.6%, the Nasdaq 100 had the sharpest drop of 1.2%, and the Dow Jones Industrial Average held steady. Meanwhile, small caps in the Russell 2000 fell 0.9%. In the major US equity ETFs, the SPDR S&P 500 ETF Trust was 0.6% lower, the SPDR Dow Jones Industrial Average ETF held flat, and the Invesco QQQ Trust fell 0.4%. The Energy Select Sector SPDR Fund was the outperformer, while the Technology Select Sector SPDR Fund lagged behind. JP Morgan Chase & Co. rose 1.6% on strong earnings and improved guidance, while other financial stocks such as Citigroup, BlackRock, PNC Financial Services Group, and Progressive Corp. reacted differently to earnings. Dollar General Corp. rallied after bringing back its previous CEO, Microsoft Corp. fell after the approval of the acquisition of Activision Blizzard by the U.K. watchdog, and ConocoPhillips and Exxon Mobil Corp. rose as oil prices surged. AMC Entertainment Holdings Inc. fell despite no company-related news, ending a five-day winning streak. In the commodities, bonds, and other global equity markets, crude oil rallied 4%, treasury yields were lower, the dollar rose, European equity indices had a negative session, gold and silver saw gains, and Bitcoin remained flat.