Most conflicts, whether large-scale wars or minor disputes, eventually reach a point where the parties involved find it less advantageous to continue fighting than to negotiate a settlement.
Even so, rather than directly trying to find common ground without resorting to force and bloody wars, the parties often prefer to measure their strength before sitting down at the table.
But perhaps this time, it will be different, and the recent escalation in the Middle East will not become more severe than a series of attacks.
Judging by the subdued reaction of energy markets, especially oil prices, investors seem to be betting on the best-case scenario: the absence of a full-scale war.
On the other hand, the fact that governments are advising their citizens to evacuate Lebanon suggests that a confrontation could be inevitable.
Could it become something more serious?
The last few years have shown that anything is possible. Right now, the biggest concern is that not only Iran but also Turkey could become involved in the conflict between Israel and Hezbollah.
We can only hope that existing safeguards will kick in: U.S. support for Israel in the first case and the current economic situation in the second.
But what if the conflict escalates significantly?
The fighting will most likely spill over into Lebanon. Although Lebanon is not a major oil producer, it is in a strategically important location.
The Mediterranean Sea, which borders Lebanon, is a crucial shipping route for world oil. A conflict in this area could disrupt maritime traffic and affect the flow of tankers.
These disruptions could cause delays and increase transportation costs. While this would not lead to a sharp increase in global inflation, it could slow deflation somewhat.
What else could roil the markets?
Even if tensions between Hezbollah and Israel do not lead to severe global economic problems, many factors could cause volatility in the markets.
This week, we will hear monetary policy decisions from the FOMC, BOE, and BOJ as well as quarterly earnings reports from Microsoft, Meta, Apple, and Amazon.
Earnings reports stand out in particular. Last week, weak reports from Tesla and Alphabet significantly contributed to the decline of the S&P 500 and Nasdaq.
As for central banks, the big unknown is whether Jerome Powell will hint at a possible rate cut in September or whether the debate will continue unabated.