Hamas makes progress on disarmament after 3-year Gaza conflict

Hamas and mediators in Cairo have made progress on disarmament, Israeli officials said, the most significant breakthrough in ceasefire talks since the Gaza war began in October 2023.

Hamas and mediators in Cairo have made progress on disarmament, Israeli officials said Wednesday, the most significant breakthrough in ceasefire negotiations since the conflict erupted in October 2023.

"The discussions in Cairo have yielded tangible movement on the disarmament framework, though significant gaps remain," an Israeli official familiar with the talks told Haaretz, speaking on condition of anonymity.

The progress comes as violence continues on the ground. Israeli strikes killed three people in Gaza, including two children, according to Palestinian medical officials, a reminder of the fragility of the talks. The negotiations in Cairo, mediated by Egypt and Qatar, have focused on a phased disarmament plan that would see Hamas relinquish heavy weapons in exchange for a full Israeli withdrawal and a permanent ceasefire.

A successful ceasefire would remove one of the key risk premiums embedded in Middle East markets since the Oct. 7 attacks, potentially lowering crude oil prices and reducing safe-haven demand for gold and the US dollar. Failure to reach a deal could trigger renewed escalation, with Iran-backed proxies across the region remaining on alert.

The disarmament issue has been the primary sticking point in months of on-off negotiations. Israel has insisted on the complete demilitarization of Gaza as a condition for any lasting ceasefire, while Hamas has previously rejected any discussion of giving up its weapons before a full Israeli withdrawal. The reported progress in Cairo suggests both sides may have moved toward a compromise framework.

The last time negotiations reached a similar stage was in May 2024, when talks collapsed over the same disarmament question. In the subsequent months, Israel expanded its ground operations into Rafah and Hamas regrouped in northern Gaza, prolonging a conflict that has displaced more than 1.9 million people, according to the United Nations.

For financial markets, the outcome carries significant implications. Brent crude has traded with a geopolitical risk premium since late 2023, with traders pricing in the possibility of a broader regional conflict involving Iran and its proxies. A ceasefire deal that includes a credible disarmament component could see that premium unwind, benefiting import-dependent economies in Asia and Europe. A breakdown in talks could push oil prices higher and drive further safe-haven flows into gold and the dollar.

The next round of negotiations in Cairo is expected within days, with US and European mediators also set to participate, according to the Israeli official.

This article is for informational purposes only and does not constitute investment advice.