FirstFT: Israel forms unity government ahead of expected Gaza offensive

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Israel’s new unity government pledged to change the “strategic reality” of a Gaza Strip controlled by Hamas in an emotional address yesterday evening, as it tightened its siege of the enclave ahead of an expected ground offensive.

Earlier in the day and in response to Saturday’s deadly attack by Hamas, Prime Minister Benjamin Netanyahu formed an emergency war cabinet and unity government with opposition leader Benny Gantz.

Netanyahu, Gantz and defence minister Yoav Gallant will lead the war cabinet, which will serve for the duration of hostilities, while legislation unrelated to the conflict would not proceed, said the prime minister’s Likud party and Gantz’s centre-right National Unity party.

The deal is an attempt to bypass the rift in Israeli politics caused by a polarising judicial overhaul, ahead of what threatens to be a deeply challenging and prolonged military campaign.

The agreement came as the siege brought down Gaza’s power supply, leaving residents alarmed they would soon lose contact with the outside world. Meanwhile Israel has sent tens of thousands of army personnel to the border with the enclave.

More than 2,000 people have been killed on both sides, with dozens of hostages still being held by Hamas. Here are the latest updates on the war.

• Military briefing: A ground offensive to root out Hamas militants in Gaza will test the Israel Defense Forces’ urban warfare skills.

• Human toll: Dozens of bodies — including those of women and children — line the streets of Kibbutz Be’eri, a farming community attacked by Hamas gunmen.

• Gaza Strip: Living conditions deteriorated sharply as Israeli warplanes pounded the coastal enclave for a fifth day and the territory’s sole power station ran out of fuel.

• Hizbollah: Intensifying clashes on Israel’s border with Lebanon have raised fears that the Iran-backed group could join the war.

Here’s what else I’m keeping tabs on today:

• Economic data: The UK provides its gross domestic product estimates and the US releases its consumer price index. Opec and the International Energy Agency publish oil market reports.

• EU-China: The bloc’s chief diplomat Josep Borrell arrives in Beijing for high-level talks with Chinese foreign minister Wang Yi.

• European Central Bank: The bank publishes minutes from its latest rate-setting meeting.

• Gibraltar: Polls point to a knife-edge general election result in the British overseas territory.

Five more top stories

1. US president Joe Biden ramped up diplomatic efforts to prevent Israel’s anticipated ground assault on Gaza from spiralling into a wider conflagration, telling the country’s prime minister he must “operate by the rules of war” and warning other regional powers not to exploit the situation.

2. More surveyors are reporting falling UK house prices than at any time since February 2009, against economists’ expectations of an improvement. Demand and sales volumes also contracted last month, according to the Royal Institution of Chartered Surveyors’ house price balance. Here’s why the housing market’s weakness is likely to continue.

3. Goldman Sachs said it has sued Malaysia over disputed payments related to 1MDB, arguing that the country did not recognise $500mn in assets provided under a 2020 settlement in the money-laundering scandal. Here’s more on the latest chapter in the multibillion-dollar embezzlement scheme.

4. Exclusive: China’s HongShan is plotting to expand globally after splitting from Sequoia Capital earlier this year due to political pressure. With the domestic economy slowing down, the plans could see the venture capital group investing in foreign companies targeting the Chinese market or those founded by overseas Chinese entrepreneurs. Read the full story.

5. Steve Scalise narrowly won the Republican nomination to serve as the next US House Speaker, as the party races to determine who will lead the lower chamber of Congress. Scalise said his first act as Speaker would be to pass a resolution in support of Israel in its fight against Hamas. But he still faces a vote by the full House, which Republicans control by a slim margin.

News in-depth

Volodymyr Zelenskyy’s plea for more weapons at Nato’s meeting in Brussels yesterday underscored a pressing concern: allied support for Ukraine is dwindling as attention is diverted to the Israel-Hamas war and American backing becomes uncertain. With the US’s vital role in supplying arms, analysts say even a temporary pause in its support could impact Kyiv’s war strategy within weeks.

We’re also reading and listening to . . . 

• Global economy: There’s a rising fear that the world economy is being fragmented as geopolitical tensions fuel a battle for raw materials, but past experience would suggest otherwise, writes Alan Beattie.

• Luxury sector: Slowing sales at LVMH signal a retreat among aspirational buyers in Europe and the US, as the sector bids farewell to the “roaring” pandemic years.

• 🎧 Rachman Review: Gideon Rachman talks to the historian and writer Lawrence Freedman about the miscalculations that led to unprecedented carnage in Israel.

• UK economy: If Labour forms the next government, it will need both good luck and political courage to face Britain’s economic reality, writes Chris Giles.

Chart of the day

The EU’s debt pile is set to reach €900bn by the end of 2026 as the bloc borrows to fund coronavirus recovery programmes and support for Ukraine, but investors are finding its bonds less attractive than some of those of individual European countries.

Take a break from the news

The Rolling Stones’ new album Hackney Diamonds represents a risk. It requires us to believe, contrary to evidence, that the Mick Jagger-Keith Richards songwriting partnership is no longer semi-defunct. But the record shows fresh life for the band in its old age, writes FT music critic Ludovic Hunter-Tilney.

Additional contributions from Benjamin Wilhelm and Gordon Smith