Tel Aviv Stocks Fall as U.S.-Iran Deal Prospect Dampens Israel Outlook

Investors in Tel Aviv sold off sharply on Monday as markets reacted negatively to the emerging U.S.-Iran agreement. While Wall Street opened higher, the Tel Aviv trading session ended lower, with the TA-125 down 2.3%, the TA-90 off 3.4%, and the TA SME 60 falling 1.2%.

Analysts said the decline reflects concern that the deal leaves Israel uncertain about Iran’s future nuclear capability and regional behavior. Shi Zigalman of Bank Hapoalim said, “The market understands that the agreement does not help Israel achieve its strategic goals and there is a general negative feeling that is spreading among investors.” He said the move reverses the surge seen at the start of the campaign against Iran about three and a half months ago, when Israeli indices rose almost 5% after renewed U.S. and Israeli strikes.

Zigalman noted that global markets then feared a jump in oil prices, which indeed rose above $100 a barrel after the Strait of Hormuz was closed. Now, he said, the world is celebrating the reopening and oil has fallen to about $80 a barrel. He added that investors are now focused on what the deal means for defense spending, the budget deficit, interest rates, and growth.

Amid the drop, the only sector to rise was semiconductors, with Tower, Nova, and Camtek benefiting from AI-related investment. Amit Atar, co-chief executive of Mor Mutual Funds, said the decline was “natural and logical,” arguing the deal is not seen as favorable for Israel and that the recent rally had been very steep. He also said defense shares fell unexpectedly, since continuing threats could keep demand for their products high.

Both analysts urged investors to diversify beyond the local market. Atar said election-related uncertainty is now a key risk, warning that a coalition deadlock or repeated elections could delay budgets and make long-term government action harder. The TA-125 is still up 17% since the start of the year.