The fallout from Saturday’s surprise attack on Israel by the Palestinian group Hamas reverberated through Middle East markets, sending stocks sliding and setting the tone for what’s likely to be a volatile week.

Major equities gauges in the region fell Sunday, led by the 4.9% drop on Israel’s benchmark TA-35 stock index, its biggest loss in more than three years. The Tadawul All Share Index in Riyadh fell 1% while stocks in Kuwait, Qatar, Oman and Bahrain also weakened. Egypt’s EGX30 gauge declined as much as 2%.

The Hamas assaults mark the deadliest attack on Israel in decades and threaten to escalate into a broader conflict. Israeli Prime Minister Benjamin Netanyahu declared that his country would launch a prolonged military campaign against Hamas and expressed confidence Israel would win. President Joe Biden pledged “rock solid” US support for Israel.

The conflict comes at a time of diplomatic sensitivity and also a moment of historic division within Israel over Netanyahu’s coalition with Israel’s far-right and their efforts to overhaul the nation’s judiciary. The Israeli shekel has slumped toward a seven-year low in recent days.

“Divisions in Israel’s politics and security structure will be papered over while the military response in Gaza is ongoing, but they are not going away,” said Hasnain Malik, a Dubai-based strategist at Tellimer, a provider of research and data on emerging markets to investors. “That will remain a vulnerability for all Israeli asset prices.”

(Updates prices.)