Israeli Stocks Slip on Iran-U.S. Deal Expectations as Wall Street Rallies

The Tel Aviv market fell sharply, with the TA-35 down about 2%, the TA-125 off 2.2% and the TA-90 down 3.4%. Bank, insurance and defense shares led the decline, as investors priced in the possibility that an end to the fighting would hurt those sectors. The insurance and financial indexes dropped 5.8% and 4.7%, respectively, while the defense index lost more than 3%. At the same time, technology shares were the only bright spot, rising 0.2% thanks to dual-listed chip stocks. Tower jumped about 7% after signing a long-term supply agreement with IQE for materials used in its silicon photonics platform for AI and data-center applications, and it briefly overtook Bank Hapoalim in market value.

Global markets rallied strongly on the same diplomatic optimism. The Nasdaq rose 2.9%, the S&P 500 gained 1.7% and the Dow Jones reached a new record. SpaceX, which surged about 20% in its Nasdaq debut last week, climbed another 20% to a market value of $2.5 trillion, making it the world’s sixth-largest company by market cap behind TSMC. The IPO raised a record $75 billion and is being seen as the start of a hot summer for listings, with OpenAI and Anthropic expected to come next. On Wall Street, Brian Mulberry of Zacks Investment Management said the trading looked more orderly than expected and “doesn’t look like some kind of meme stock from the start.” Wedbush analyst Dan Ives called SpaceX’s public debut a “watershed” moment for technology, while Guardian Wealth Advisors’ Rand Milwood warned that the company has no positive cash flow and may be overvalued.

Bonds were relatively calm in Israel, where the local Tel Gov index was unchanged and the long-shkel index slipped 0.1%. In the U.S. Treasury market, yields eased modestly, with the two-year yield down more than 2 basis points to 4.05% and the 10-year yield down a bit more than 1 basis point to 4.47%. The move reflected expectations that lower oil prices and reduced geopolitical risk will ease inflation pressures before Wednesday’s Federal Reserve decision, the first under Chair Kevin Warsh. In currencies and commodities, the shekel initially strengthened 0.4% to 2.90 per dollar yesterday, then weakened 0.3% this morning to 2.91. Brent crude fell more than 5% to around $83 a barrel, gold rose more than 2% to about $4,340 an ounce, and bitcoin briefly topped $67,000 before trading near $65,000.

May consumer prices in Israel fell 0.3%, more than economists had expected, leaving annual inflation at 1.9%, just below the midpoint of the Bank of Israel’s target range. The drop was driven by lower seasonal airfares and a stronger shekel, though housing remained sticky, with rent for new tenants jumping 6.8%. Home prices, which are not included in the CPI, fell 0.3% in the latest reading and are down 1.3% year on year. Mizrahi Tefahot chief economist Ronen Menachem said the softer inflation print could help the Bank of Israel consider another rate cut, though housing still needs close attention. Abroad, the Bank of Japan raised rates to 1%, the highest since 1995, and the Federal Reserve is expected to leave U.S. rates unchanged on Wednesday.

Evercore ISI said SpaceX could reignite the Wall Street bull market, with strategist Julian Emanuel arguing that the S&P 500 could ultimately rise above 9,000 points, though his base case is 7,750. He compared the current enthusiasm to Netscape’s 1995 debut and said SpaceX, together with future offerings from Anthropic and OpenAI, could trigger a new wave of “Dream Big FOMO.” Emanuel also pointed to $7.9 trillion sitting in money-market funds as a potential source of fuel for further gains.