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Global stock markets were in the red at the start of the new week owing to rising geopolitical concerns centred on the Middle East following the weekend terrorist attacks by Hamas on the state of Israel, however, there are indications these market movements prove temporary.

The Dollar rose and oil spiked by as much as 5.0% but ultimately ceded much of the advance.

The arch of concern loops back to Iran - a longtime sponsor of Hamas - which remains a major supplier of oil to global markets.

Investors are questioning whether Israel's defensive operations will extend to this major oil-producing country, or at the very least whether global sanctions on Tehran will be ramped up.

"After the terrorist attack on Israel, all eyes are on the conflict and whether it can be contained or whether further escalation lies ahead. This pertains to the action on the ground but also to the geopolitical power game in the region, most notably with regard to Iran," says Christian Gattiker, Head of Research at Julius Baer.

Rising oil prices raise inflation expectations, which in turn supports global bond yields. Surging bond yields have already been a concern for investors of late as they signal the cost of borrowing is rising, which signals tougher times ahead for households and businesses.

In turn, this supports the Dollar, which benefits from both higher U.S. yields and the safe haven demand created by falling markets.

Above: The Dollar index (top) and WTI crude oil prices. Both are up in light of weekend events in Israel.

The key question facing investors at the start of the week is to what extent the geopolitical flareup in oil prices and the Dollar can extend.

"Historically, markets have rebounded from geopolitical crises," says Nigel Green, CEO of deVere Group. "I would urge investors to avoid knee-jerk reactions to the oil price surge."

WTI oil prices plunged 9.0% last week and despite the conflict in the Middle East are only up 2.72% at the time of writing Monday. They had been as much as 5.0% higher earlier in the day.

Indeed, the initial spike has faded somewhat and it appears crude has a mountain to climb if it is to reverse the declines that are linked to concerns for the outlook of global growth.

"We will closely monitor the situation but believe that this is unlikely a tectonic shift in geopolitics bearing lasting impact," says Norbert Rücker, Head of Economics & Next Generation Research at Julius Baer.

The Dollar index - a broad measure of USD performance - is firmer by 0.40% at 106.51 and remains well supported.

The U.S. currency remains in an uptrend and this can continue, although the main driver here will likely remain rising U.S. bond yields as opposed to geopolitical concerns.