Israeli Prime Minister Benjamin Netanyahu stated on Thursday that his government will maintain control over the Gaza Strip, even if Hamas agrees to a ceasefire deal at the last minute. In an interview with "Sky News Australia," Netanyahu said the military operation is "approaching its end" and "even if Hamas accepts the deal, Israel will control Gaza.".

Netanyahu further stated that the war could end immediately if Hamas lays down its arms and releases the remaining hostages. He emphasized that Israel's goal is to free all hostages and disarm Hamas, and that eliminating the last stronghold of Hamas is essential for lasting peace in the region. He indicated that the intention is not to occupy Gaza, but to liberate Gaza from Hamas's tyranny and free Israel and others from Hamas's terror. He mentioned the full support of US President Donald Trump for the objective of controlling Gaza City to eliminate Hamas.

In connection with these statements, the Israeli army has called up approximately 60,000 reservists, signaling the continuation of operations to control the largest city in the Gaza Strip, despite international condemnation. However, a military official noted that most reservists would not participate in combat and that the strategy for controlling Gaza City has not yet been finalized. These statements come amidst significant domestic Israeli pressure for a hostage deal and an end to the war, reflecting Netanyahu's balancing act between public sentiment and strategic objectives.

Market Signals

Continued regional instability sustains a geopolitical risk premium in markets, impacting oil prices, regional currencies, and investor sentiment.
The continuation of the conflict and the stated intention for a prolonged Israeli presence in Gaza are likely to sustain or increase demand for defense and security products and services, benefiting military technology and cybersecurity firms.
Long-term, the reconstruction of Gaza presents significant investment opportunities in construction, building materials, energy, ICT, and infrastructure development, contingent on a stable political and security environment.
Egypt's economy is particularly vulnerable due to its reliance on Suez Canal revenues and tourism, both negatively impacted by regional instability and Red Sea tensions stemming from the Gaza conflict.

Winners & Losers

The defense industry benefits from ongoing tensions and Israel's increased defense spending. Conversely, tourism sectors in Egypt and the region, as well as shipping and logistics companies, are negatively affected by Red Sea tensions and potential disruptions. The Egyptian economy also faces significant challenges due to declining Suez Canal and tourism revenues. Palestinian civilians in Gaza suffer continued hardship from the ongoing conflict and Israeli control.

Action Timeline

Immediate: Monitor the progress of ceasefire and hostage release negotiations, as these will directly influence the short-term trajectory of the conflict.
Short-term: Assess the scale and success of Israel's planned military operations in Gaza City, as this will indicate civilian impact and humanitarian aid needs.
Long-term: Develop long-term plans for reconstruction opportunities in Gaza, focusing on partnerships and meeting infrastructure and essential service needs in a high-risk environment.

Risk Assessment

Regulatory Risks: Potential for increased sanctions or international scrutiny of Israel's actions in Gaza.
Geopolitical Tensions: The primary risk remains the potential for a broader regional conflict, which could cause significant disruptions to energy markets and global trade.
Market Volatility: Continued uncertainty and the possibility of escalation will sustain volatility in financial markets, particularly in the MENA region.
Economic Instability in Egypt: The ongoing conflict poses a significant risk to Egypt's already fragile economy.
Reconstruction Delays: Prolonged conflict and potential for further destruction could lead to significant delays in reconstruction efforts.

Key Indicators

Netanyahu's statements signal a potential strategic shift towards a longer-term Israeli control over Gaza, irrespective of Hamas's actions.
Ceasefire negotiations and hostage release deals will serve as key indicators for the immediate direction of the conflict.
Investment firms are monitoring opportunities in the defense sector and potential reconstruction projects in Gaza.

Regional Perspective

Netanyahu's firm stance on Gaza control, regardless of any ceasefire, is redefining the security landscape in the Middle East. This position has direct implications for regional stability, particularly for Egypt, which relies heavily on the stability of maritime routes.

Immediate Implications

Geopolitical risks will continue to affect regional and international markets, with potential volatility in oil prices.
Defense sector companies should assess available opportunities amidst ongoing tensions and increased military spending.
The need to reassess the resilience of supply chains passing through the Middle East is growing.

What to Watch

Progress of ceasefire and hostage release negotiations.
The scale and success of Israel's planned military operations in Gaza City.
Any signs of regional escalation involving other actors like Hezbollah or Iran.
International commitments and the actual flow of funds for humanitarian aid and reconstruction efforts in Gaza.

Netanyahu's stance underscores a potential strategic shift towards long-term control of Gaza, reflecting a balance between military objectives and domestic political pressures. This trend could lead to a prolonged period of regional instability with profound economic and geopolitical consequences.