The U.S. embassy in Israel was moved this morning from Tel Aviv to Jerusalem in what Israelis are calling a historic moment and a brave decision for U.S. President Donald Trump. The move came as Trump honored one of his key campaign promises, one that skeptics had believed would never come to fruition. Though most world leaders opposed Trump’s decision, Israel has already announced that several countries will be following Trump’s lead by moving their embassies to Jerusalem. Guatamela’s Jerusalem embassy will be opening next week, with Panama and Honduras set to follow suit.
Violent clashes have broken out on the Gazan border in response to the move, with 25 Gazans killed in the skirmishes thus far. The Arab League is planning to hold an extraordinary meeting to discuss the embassy’s move and to determine its next steps. Speaking to CNBC on Monday, Prince Turki Al-Faisal of Saudi Arabia has said that “America has stood for rule of law, for justice, for respect of international agreements…and now we see all of that being pushed aside for the sake of internal political calculations.” The comments came only days after Saudi Arabia supported President Trump’s decision to withdraw from the Iran nuclear deal, sending a confusing message to analysts as to whether Saudia Arabia remains allies with the U.S. or has aligned itself with its Middle Eastern neighbors.
Analysts are carefully watching how the uptick in violence will impact oil prices, as oil prices tend to fluctuate strongly during times of strife in the Middle East. Of specific interest is how Trump’s embassy decision will impact the U.S.’s participation in key United Nations agencies. U.S. law requires Washington to cut funding to any UN agency that admits the Palestinians as full members, which includes the World Trade Organization. The move, contested by most European leaders, could also lead to diplomatic strains between the U.S. and EU, which have already been strained recently after Trump withdrew from the Iran deal.
President Trump’s willingness to impose sanctions on countries that don’t yield to his demands could make things interesting as world leaders weigh their response to the embassy’s move. Traders and analysts worldwide should be aware of these developments and should watch closely for reactions that could impact the markets.