Trump's Hormuz Deal Sinks Oil, but Israeli Markets Stay Skeptical

After Donald Trump posted on Truth Social, “Ships of the world, start your engines, let oil flow,” the focus of the conflict shifted. Instead of centering on Iran’s nuclear program and ballistic missiles, the new priority became reopening the Strait of Hormuz and calming inflation fears in the U.S. and Europe.

Global markets reacted with optimism. Shares rose and Brent crude dropped about 5% to roughly $82 a barrel, far below the wartime peak of $119. In Israel, however, the response was muted. The Tel Aviv market opened higher and the dollar briefly fell below 2.9 shekels, but stocks soon turned negative. Banks fell sharply, possibly on expectations of aggressive Bank of Israel rate cuts, and real estate, insurance, and defense shares also weakened. The dollar later erased most of its losses and returned near last week’s level.

IBI chief economist Rafi Gozlan said that from an Israeli perspective, hopes for regime change or the removal of Iran’s nuclear threat were not realized. Globally, he said, investors are mainly pricing the energy shock from Hormuz, not the nuclear issue. Mizuho? No, Mizrahi Tefahot chief economist Ronen Menachem said the war became “an economic war,” which helped Iran, because markets in Europe and elsewhere are reacting to the energy impact. He added that the market still wants to see the talks advance and the strait actually reopen.

Before the war, Brent was at $60 to $65, and analysts say it is unlikely to return there soon. Goldman Sachs kept its forecast for $90 a barrel in the fourth quarter despite the ceasefire talk, while trimming its 2027 forecast to $80 from $85. The bank warned that low remaining inventories could keep prices volatile if diplomacy fails. Lower energy costs would help ease inflation and support sectors such as technology, aviation, transport, and retail. In Israel, the weaker oil shock does not remove security costs, and Gozlan said defense spending still threatens civilian budgets, with the economy already bearing a doubled defense burden since October 7.