Beyond the human tragedy, the interesting thing is what has not happened. Unlike in the past, there seems to be less concern that this war will spin out of control. To see why, let’s start with energy.
The major suppliers of oil and natural gas have not been affected by the war at this point and are not likely to be, in my view. Oil prices are down over the past month (as of this writing), despite a surge in the aftermath of the attacks, suggesting markets are not that worried. That makes sense in that there are other sources of supply (including the U.S.) that can step up if needed. This has been the major factor that made past Middle East conflicts globally relevant, and it is much less now.
Another factor that I believe should limit the impact is geopolitics. The Arab countries have generally disengaged from the Palestinian issue, and Saudi Arabia was even exploring direct ties with Israel—the disruption of which may have been a key motive for the attacks. There doesn't appear to be a strong desire by most countries for a war, which means that diplomacy will have a chance to work. Similarly, the Hamas organization is primarily supported by Iran, a Shia country, while the Arab countries are primarily Sunni, which could make support unlikely for religious reasons. Finally, with Iran in the mix, the Arab countries have real reasons not to help an Iranian initiative. I believe there are few reasons for any of the locals to want to widen the conflict and lots of reasons to help resolve it as quickly as possible. And that is good news.
None of this is to minimize the tragedy here but to conclude that as bad as it is, the impact on the rest of the world will likely be limited. As people, we can and should mourn the victims. As investors, this is something to watch, but not panic about. And while this news is certainly not great, it could indeed be worse.