Hamas readies for Gaza talks that US hopes will halt war, free hostages

Hamas officials are in Egypt for critical U.S. and Qatari-mediated talks with Israel aimed at securing a comprehensive deal to halt fighting, release hostages, and define Gaza's future, based on a Trump-promoted plan. Negotiations are reportedly advancing rapidly, with the first phase of a hostage-prisoner exchange anticipated this week, as mediators prioritize a comprehensive agreement upfront to avoid past failures. This diplomatic push has fueled significant market optimism, evidenced by the Israeli shekel hitting a three-year high and Tel Aviv stocks reaching an all-time high, despite ongoing Israeli strikes and domestic political challenges for Prime Minister Netanyahu.

Analysis

CAIRO/JERUSALEM/CAIRO/WASHINGTON, Oct 5 (Reuters) - Hamas officials arrived in Egypt on Sunday ahead of talks with Israel that the U.S. hopes will lead to a halt in fighting and the freeing of hostages in Gaza, with Washington's top diplomat saying the next days are critical. Israeli negotiators led by Strategic Affairs Minister Ron Dermer were to travel to Egypt on Monday for negotiations in the Red Sea resort of Sharm el-Sheikh about the release of hostages, part of U.S. President Donald Trump's plan to end the nearly two-year Gaza war. The Reuters Gulf Currents newsletter brings you the latest on geopolitics, energy and finance in the region. Sign up here. Advertisement · Scroll to continue "We will know very quickly whether Hamas is serious or not by how these technical talks go in terms of the logistics," U.S. Secretary of State Marco Rubio told NBC News' "Meet the Press" on Sunday about the release of 48 remaining hostages in Gaza, 20 of whom are alive. Trump said later on Sunday negotiations were advancing rapidly. "I am told that the first phase should be completed this week, and I am asking everyone to MOVE FAST," he said in a social media post. The first phase deals with the release of hostages in exchange for the release of Palestinian prisoners. A Hamas delegation, led by the group's exiled Gaza chief, Khalil Al-Hayya, landed in Egypt late Sunday to join representatives of the U.S. and Qatar for talks over the implementation of the most advanced effort yet to halt the conflict. Advertisement · Scroll to continue It was the first visit by Hayya to Egypt since he survived an Israeli strike in Doha, the Qatari capital, last month. Trump has promoted a 20-point plan aimed at ending the fighting in Gaza, securing the release of remaining hostages, and defining the territory's future. Israel and Hamas have agreed to parts of the plan. Hamas on Friday accepted the hostage release and several other elements but sidestepped contentious points, including calls for its disarmament — which it has long rejected. Trump welcomed Hamas' response, saying he believed Hamas had shown it was "ready for a lasting PEACE." He told Israel to stop bombing Gaza immediately, but its attacks on the enclave have continued. AVOIDING A PHASED APPROACH An official briefed on the talks in Egypt said negotiators would focus on hammering out a comprehensive deal before a ceasefire can be implemented. "This differs from earlier rounds of negotiations which followed a phased approach, where the first phase was agreed and then required more negotiations to reach subsequent phases in the ceasefire," the official told Reuters. "These subsequent rounds of negotiations is where things broke down previously and there is a conscious effort among mediators to avoid that approach this time around." Rubio told ABC's "This Week" that a timeline for finalising an agreement to release the hostages was uncertain but that talks "cannot take weeks or even multiple days. We want to see this happen very fast." STRIKES CONTINUE The plan has stirred hopes for peace among Palestinians, but there was no let-up of Israeli attacks on Gaza on Sunday. Planes and tanks pounded areas across the enclave, killing at least 19 people, local health authorities said. Four of those killed were seeking aid in the south of the strip, and five were killed in an airstrike in Gaza City in the early afternoon, they said. Ahmed Assad, a displaced Palestinian man in central Gaza, said he had been hopeful when news broke of Trump's plan, but said nothing had changed on the ground. "We do not see any change to the situation; on the contrary, we don't know what action to take, what shall we do? Shall we remain in the streets? Shall we leave?" he asked. SOME IN ISRAEL OPTIMISTIC FOR END TO WAR In a sign of Israeli optimism over the Trump plan, the shekel currency hit a three-year high against the dollar and Tel Aviv stocks reached an all-time high. Some people in Tel Aviv shared that sentiment. "It's the first time in months that I'm actually hopeful. Trump has really instilled a lot of hope into us," said resident Gil Shelly. Domestically, Israeli President Benjamin Netanyahu is caught between growing pressure to end the war — from hostage families and a war-weary public — and demands from hardline members of his coalition who insist there must be no let-up in Israel's campaign in Gaza. Far-right Finance Minister Bezalel Smotrich said on X that halting attacks on Gaza would be a "grave mistake." He and Security Minister Itamar Ben-Gvir have threatened to bring down Netanyahu's government if the Gaza war ends. But opposition leader Yair Lapid of the centrist Yesh Atid party has said political cover will be provided so the Trump initiative can succeed and "we won't let them torpedo the deal". Israel began attacking Gaza after the October 7, 2023, Hamas-led attack on Israel in which some 1,200 people, mostly civilians, were killed and 251 taken hostage, according to Israeli tallies. Israel's campaign, which has killed more than 67,000 people in Gaza, most of them civilians, according to Gaza health authorities, has led to its international isolation. Additional reporting by Jaidaa Taha, Andew Mills, Mahmoud Issa, Miro Maman, Jasper Ward, David Morgan and Kanishka Singh; Writing by Michael Georgy, Hatem Maher, Raphael Satter and Patricia Zengerle; Editing by Louise Heavens, Ros Russell, Cynthia Osterman and Richard Chang Our Standards: The Thomson Reuters Trust Principles. Significant diplomatic progress towards a Gaza ceasefire has catalyzed a strong positive reaction in Israeli financial markets, with the shekel reaching a three-year high against the dollar and Tel Aviv stocks hitting an all-time high. This optimism is fueled by ongoing negotiations in Egypt, where mediators are reportedly focusing on a comprehensive deal to avoid the failures of previous phased approaches, with the first phase of a hostage-prisoner exchange anticipated this week. However, substantial risks remain that could undermine this positive sentiment. The most significant is the domestic political pressure on Israeli Prime Minister Netanyahu, whose far-right coalition partners have threatened to collapse the government if the war is halted, creating a major implementation hurdle. Furthermore, despite the high-level talks, Israeli military operations in Gaza are continuing, indicating that the situation on the ground has not yet de-escalated, which could complicate or derail the fragile negotiation process.

Key Decisions for Investors

• Given the shekel's three-year high and the stock market's all-time peak, investors should recognize that a successful diplomatic outcome is substantially priced in, warranting caution against over-exposure until a deal is formally signed.
• The primary risk factor is Israeli domestic politics; any sign of instability within Netanyahu's coalition, particularly from far-right partners, could immediately reverse positive market sentiment and should be monitored as a key risk indicator.
• Investors should watch for the completion of the first phase of the hostage exchange, anticipated this week, as its success or failure will serve as a critical near-term catalyst for Israeli assets and a strong indicator of the viability of a comprehensive agreement.