Israel has ordered more than a million people to leave the north of Gaza ahead of a potential ground assault intended to squash Hamas following attacks on southern Israel. The gloves are off for Israel, and such an invasion could destabilize the region. 

Louis-Vincent Gave, the chief executive of Gavekal Research based in Hong Kong, penned a note at Gavekal Research on Monday titled "When There Are No Good Options," addressing Israel's three potential strategies in handling Hamas.

Gave writes in the first option, Israel could heavily bomb Gaza, which could lead to significant civilian casualties and the potential eradication of Hamas, reminiscent of the devastation in Dresden or Tokyo in 1945. This approach, however, comes with severe consequences. Firstly, it might provoke vast public protests and alienate Israel's Western allies. More critically, it could unify Arab nations against Israel, drawing support from countries like Turkey and Iran. This may pave the way for an expanded conflict and heightened terrorism, especially given the current arms proliferation due to Afghanistan and the Ukraine-Russia conflict. This volatile scenario could destabilize financial markets, leading to surging oil prices, plummeting bonds, increased inflation, and elevated investment risks.

The second option for Israel is to avoid large-scale bombings but deploy Israel Defense Forces to target Hamas' infrastructure and leadership. While this approach may reduce widespread devastation, it would still result in significant civilian casualties. Urban warfare is challenging, as evidenced by historical events like the capture of Berlin in 1945. Hamas' strategy might be to provoke a street battle in Gaza, questioning the IDF's capability and reliability. Given the rapid dissemination of information on social media, public tolerance for casualties might be limited, pushing for a negotiated resolution. Engaging in such an operation and subsequently retreating could be perceived as an Israeli defeat. 

The third option is for Israel to adopt a patient approach, possibly targeting Hamas' leadership surgically, similar to actions taken against groups like Black September following the 1972 Munich tragedy. However, maintaining the 300,000 conscripts recalled to their units in this scenario would be costly.

Gave noted world leaders are mostly favoring Israel adopting option three. Yet, after the recent incidents in southern Israel, this approach might be challenging for the Israelis to accept because their instinct is to retaliate and confront the terrorist group.

"As I write, Israel has said that it will delay any large-scale move into Gaza, which could indicate that it is leaning towards a third option (by far the least worst for Gaza's civilian population and for the rest of the world)," Gave said, adding markets appear to be pricing in option three:

1. Oil prices are moderately increased, with the near-term WTI contract moving from US$83/bbl to US$87/bbl, but they're still below early October levels.

2. US government bond yields have remained stable, even with wars' inflationary tendencies.

3. Even after the attacks, global equity markets have seen a slight rise.

4. Gold and silver prices have experienced a modest rebound during these heightened geopolitical risks but remain below summer levels.

5. This muted response in precious metal prices is peculiar, especially as several Federal Reserve policymakers hinted at halting interest rate hikes, which should boost gold prices.

Gave offered this forecast: "Right now, markets are indicating that we will avoid World War III. Israel's move to delay its Gaza operation suggests they may be right."

Meanwhile, Michael Every, Global Strategist at Rabobank, warned "global security order is crumbling" and provided readers with three brief scenarios for how this war could potentially develop ahead. 

Authored by Jeffrey Tucker via The Brownstone Institute,

In the course of almost four years, and really dating back a decade and a half, I’ve managed to read most of the writings of the intellectuals, titans of industry, and government officials who constructed the strange reality of 2020 and after. They wanted to conduct a science experiment on the human population. Because infectious disease knows no borders, they knew for sure it would have to be a global one. 

They had every detail worked out in their models. They knew how far apart people would need to stand. They knew that the best way to stop any common virus from spreading would be total isolation of the whole human population insofar as that was possible. Families could not do that of course but they figured that they could live in different rooms or simply stay six feet apart. If they couldn’t do that, they could mask up. 

It goes without saying – but they said it anyway because their models told them so – that indoor and outdoor venues where people gathered had to be closed (those were the exact words issued by the White House on March 16, 2020). The scheme was deployed first in China, then Northern Italy, then the United States, and the rest of the world fell in line, all but a handful of nations including Sweden, which faced many months of brutal criticism for allowing freedom for its citizens. 

It’s truly hard to imagine what the architects of this barbaric policy believed would happen next. Is it as simple (and ridiculous) as believing that a respiratory virus would just disappear? Or that a potion would show up in time to inoculate the whole population even though no one has ever successfully come up with something like that before? Is that what they believed? 

Maybe.

Or maybe it was just fun or otherwise remuneratively advantageous to try out a grand and global experiment on the human population. Certainly it was profitable for many, even if it wrecked the social, cultural, economic, and political lives of billions of people. Even as I write those words, it’s hard to believe they are not out of some dystopian fiction. And yet this is what happened. 

Almost immediately, the idea of human rights took a back seat. Obviously so. So did the idea of equal freedom: that was immediately on the chopping block. By edict, the human population was divided into categories. It began with essential and nonessential, distinctions drawn from military protocols that suddenly pertained to the whole of the civilian world. 

That was only the beginning of the stark divisions. The stigmatization of the sick began immediately too. Were they sick because they were insufficiently compliant? Did they disobey the protocols? In a hundred years of public health, we’ve not seen this level and scale of demarcation. Some of this was attempted during the AIDS crisis (pushed by none other than Anthony Fauci) but not this aggressively or comprehensively. 

In those days, you could feel the concern for basic rights and freedom slipping, and with it the moral conscience of the public mind. From the beginning, it felt like martial law and the population was being divided: sick vs. well, compliant vs. noncompliant, essential vs non-essential, elective surgeries vs. emergencies needing medical services. And so on. 

And this expanded dramatically over the coming months. When face coverings came along, it was masked vs unmasked. When some states started opening, it became red vs. blue. Us vs. them. 

When the vaccine came along, the ultimate division hit, piling upon and swamping all the others: vaccinated vs. unvaccinated. The mandates massively disrupted the labor force. The public accommodations of whole cities were shut off to the unvaccinated, so that noncompliant citizens could not go to restaurants, bars, libraries, theaters, or other public places. Even houses of worship went along even though they didn’t have to, breaking their congregations into two parts. 

Behind all of this was a political motive that traces to a text that every high expert still celebrates as a prescient and decisive refutation of liberal values: Carl Schmitt’s Concept of the Political from 1932. This essay is utterly dismissive of human rights on grounds that such notions do not sustain robust states. He was of course a Nazi jurist and his thought laid the groundwork for the demonization of the Jews and the march of the totalitarian state. 

In Schmitt’s mind, the friend/enemy distinction is the best method of rallying the people around a grand cause that gives life meaning. This impulse is what gives strength to the state. He goes further: the friend/enemy distinction is best ignited in the reality of bloodshed:

“The state as the decisive political entity possesses an enormous power: the possibility of waging war and thereby publicly disposing of the lives of men. The jus belli contains such a disposition. It implies a double possibility: the right to demand from its own members the readiness to die and unhesitatingly to kill enemies.”

If for years, you have asked the question “Where does this end?” we now have our answer, which seems inevitable in retrospect: war. We are looking at the deaths of innocents and probably this as just the beginning. The lockdowns broke not only the old moral codes and agreed-upon limits to state power. It broke the human personality and spirit the whole world over. It gave rise to a bloodlust that was barely beneath the surface. 

States went crazy in bullying and dividing their citizens. It happened nearly everywhere but Israel was a leading case in point, as Brownstone has pointed out repeatedly. The citizenry has never been more divided and the state never more distracted from security concerns. The delicate peace was shattered in shocking ways on October 7, 2023 in a ghastly attack that revealed the worst security failure in the vulnerable state in its history. 

That incident then encouraged and further unleashed the apocalyptics, whole peoples determined to take the next step in the dehumanization of the population and the use of appalling means of doing the unthinkable: extermination, a word now thrown around as if it is fine and normal to speak this way. This conflict has now reached further into the politics of every country and down to every civic association, communities of intellectuals, and personal friendship. As Schmitt might have loved – and what Bret Weinstein calls Goliath (the unity of administrative state, media, corporate power, and elite tech platforms) surely celebrates – everyone is being turned into the category of friend and enemy. 

We are reminded at last of how incredibly fragile civilization – and the peace and freedom that gives rise to it – truly is. We should worry that in the drama of the moment, the history recounted above will be discarded from human memory. The plans for virus eradication failed so badly that many of its perpetrators are desperate for a dramatic change of subject so that they can avoid responsibility. Again, this is the desire, and it might even be the plan. 

This simply cannot be allowed to happen. Those of us with memories of civilized life, including universal rights and freedoms, cannot stay silent or get emotionally drawn in to the point that we are willing to forget what was done to us, the damage it inflicted on public culture, and the moral conduct a civilized people expect. 

Every war is preceded by a period of demoralization (I don’t matter), demotivation (there is nothing I can do), and dehumanization (those people are not worth saving). From there it is a simple matter of flipping the switch. 

Brownstone was founded in light of the above history to shine a light on higher ideals, not a Schmittian war between friends and enemies but societies of compassion, dignity, freedom, rights, and the exercise of human volition against all threats and uses of violence public and private. This is our guiding light now and always. Apocalypticism builds nothing; it only destroys. It’s the instantiation of the philosophy of The Joker. No nation and no community can survive it. 

Few of us knew or fully understood the depth of depravity just beneath the thin veneer of civilization that had previously dominated the large expanse of our lives. It was the maniacal experiment in disease control only a few years ago that triggered this bout of man’s inhumanity to man. There is a burning need to know how this came about and why, and take measures, now desperate ones, to put back into the Pandora’s box all that was released. 

Oil prices closed higher on the day, after a roller-coaster ride down this morning after Russia’s Central Bank reiterated expectations that OPEC+ may consider an increase in output at the beginning of 2024, but that was quickly pushed back on by Russian Deputy Prime Minister Alexander Novak.

Crude traders are also tracking events in Barbados, where Venezuela’s government is expected to sign a deal with the US-backed opposition later on Tuesday. In exchange for a freer presidential election next year, the agreement could pave the way for the US to ease sanctions against the country, potentially boosting oil exports.

“Traders remain on high alert” while oil remains in a holding pattern, said Rebecca Babin, a senior energy trader at CIBC Private Wealth.

“Many investors are not willing to make outright bets on crude in the current environment but are actively buying upside call options in the event crude supply is impacted. It is a low conviction, highly volatile trading environment.”

WTI accelerated its rebound after the missile strike on a Gazan hospital.

After last week's large crude build (and draws at Cushing and in products), all eyes are for any signs of further demand destruction.

API

• Crude -4.38mm (+400k exp)

• Cushing -1.00mm

• Gasoline -1.58mm (-600k exp)

• Distillates -612k (-1.2mm exp)

API reports inventory drawdowns across the board with Crude stocks unexpectedly falling 4.4mm barrels (+400k exp) and Cushing getting ever closer to 'tank bottoms'...

Source: Bloomberg

WTI was hovering around $87.20 and extended gains after the draws...

Bloomberg's Javier Blas penned an interesting op-ed, blasting the fact that the Biden administration has allowed the SPR to run so low, saying that this ignorance could not come at a worst time.

Henry Kissinger called it “the economic equivalent of the Sputnik challenge.” 

Exactly 50 years ago today, the US found itself under economic assault after Arab nations weaponized oil, starting a petroleum embargo that brought the global economy to its knees.

Kissinger, vowing America would never be blackmailed again, designed a shield against the oil weapon: the Strategic Petroleum Reserve. A stockpile containing hundreds of millions of barrels of crude, its function was to offset the impact of any future supply disruption, intentional or not. Half a century later, Washington has forgotten that lesson.

The SPR today contains less than half the crude it had at its peak just over a decade ago. At about 350 million barrels, it's at its lowest since 1983. To put what’s left into perspective, the US released about 270 million barrels over the last two years to cap oil prices.

[ZH: For context, there is less than 20 days of supply left to meet current levels of demand... but we know SPR can't go to 'zero' so good luck]

If the SPR is a revolver, it has a final round left in the chamber — and that’s it.

Worth a read...