The focus in the Middle East is on hostage releases with Qatar playing a major role in negotiating hostage releases in return for food, medicine, water and fuel being allowed in via Egypt’s Rafah crossing. Daily needs are over 200 trucks according to the UN but only a fraction of that is being permitted in by Israel. A lower number of trucks have been allowed in due to Israeli fears that Hamas will take most of the items. Their main concern is about fuel, which can be used for more rocket attacks against Israel. On the humanitarian side the fuel is needed in hospitals and kitchens to provide necessary medical care and provide heated meals. A big release of 50 hostages is being proposed by Qatar and the US has been advising Israel to halt its invasion of Gaza so this deal can succeed. Internally in Israel the pressure is on the government to start the invasion and free the hostages and destroy Hamas. It is a very tense situation as Israel has the US’s support to destroy Hamas after the heinous attack on civilians on October 7th but has been held back by the US. The US wants to see if their 10 remaining US hostages will be released in the new exchange. The US also has hundreds of dual citizen Palestinian/US citizens in Gaza and is working to get them out of Gaza with Qatari help.

On the military front, Iran is having its proxies attack Israel from Lebanon (Hezbollah), West Bank (Islamic Jihad) and Yemen (Houthis). Against the US it has its proxies in Syria and Iraq attacking US bases in each country and last reporting shows that over two dozen US service members have been injured (thirteen attacks just over the last week). If the war is to be contained or allowed to be a regional war will be up to the Mullahs in Iran. With daily attacks against Israeli and US forces the odds of this being contained is more and more unlikely. Once the ground offensive in Gaza starts Hezbollah will likely get the go ahead from Tehran to use their 150,000 missiles (guided and unguided) and its 100,000 bloodied soldiers (they fought to keep Assad in power in Syria). They would then attack via southern Lebanon and Syria, making Israel fight a two front war. In the meantime, Yemeni forces will fire more cruise missiles and drones at Israel (US naval forces have already stopped one attack against Eilat). What Israel is worrying about is fighting in the west bank (a three front war if this occurs) and is hitting terrorist targets before they attack to impede this front being expanded. 

Some other occurrences:

• Saudi Arabia has urged its citizens to leave Lebanon “Immediately & Now”.
• The US has removed non-emergency personnel and family members from Lebanon and advised US citizens to leave the country.
• Israel has evacuated over 20 villages and 60,000 people from northern Israel as it expects Hezbollah to attack aggressively once the Gaza offensive commences. 
• Russia has moved more military assets to its bases in Syria. This included more of their front line fighter jets. 
• The US has sent more Iron Dome equipment to Israel to defend northern Israel and to increase defenses for American troops in the area. Israel has agreed to delay the offensive until these supplies are in place over the coming weeks. 
• The US is sending Israel artillery shells to be able to defend against future attacks in the north. These were originally destined for Ukraine. 
• Israel found files on dead terrorists with instructions on how to make and use cyanide based chemical weapons. This is a new escalation of weapons and brings WWI and WWII banned weapons back in play. 
• As Israel regained control of southern Israel they found on some of the terrorist bodies documents showing that any Hamas member bringing back a hostage would be paid US$10,000 each.
• Israel’s navy has stopped a number of attacks by Hamas divers who were trying to enter Israeli towns north of Gaza and take more hostages and kill others. 
• The US and allies are pressuring Israel for their exit plan after they defeat Hamas. Will they allow international peacekeepers to go in and control the place and then when safe  hold new elections without any terrorist groups allowed to run?

The US economy remains hotter than forecast as consumers keep on spending and increasing their credit card debt to maintain lifestyle. At the same time the most recent forecast for the US deficit has reached US$2T. The Treasury is very active a few times a week with new issues to fund the deficit and roll over maturing debt and there have been quite a few issues that were weak and rates rose. The focus is on the 10-Year Treasury now at 4.92% which would cause havoc if it exceeded 5%. It did touch there but has not yet exceeded this rate. Any real difficulty raising funds or if Congress fails to elect a Speaker and then pass funding needs for the government then we may see a breach of 5% which would tank stock markets. Some forecasters are throwing around rates rising to over 6% before the end of the year. November 17th is the day the US is supposed to run out of current funding. The President’s urgent aid  request of US$105B is caught up in this Republican Speaker mess. 

Market Movement:  We have warned about a breach of the 33,600 level for the Dow (today at 33,225), which completes a topping formation for the Dow. A close below 32,600 would set up the waterfall decline phase to below 30,000. Stay patient with cash reserves. 

Once this correction has lowered stock prices and fear has returned to the markets over the coming weeks, be ready to buy the bargains that develop. As the general stock market declines we expect energy prices to back off and the Energy Bullish Percent Index to retreat back to below 10% and ring the bell for the next BUY window. The last BUY signal was in March and we added 14 new ideas to our Action BUY List. Many energy stocks are down from their 2022 highs, and many trade around Proved Developed Producing (PDP) Reserve valuations levels. If you want to see what our subscribers are looking at, sign up now for access to the Schachter Energy Research reports.