Global Markets Brace for Volatility Amid Middle East Tensions and Rising Bond Yields

The Tel Aviv Stock Exchange is expected to seek direction this morning, influenced by the Bank of Israel's recent interest rate cut, which could stimulate the local market. However, global markets are on edge due to escalating Middle East tensions, rising bond yields, and oil prices, compounded by declines in Asian markets and Wall Street's performance yesterday. Israeli dual-listed stocks showed mixed results in pre-market trading, with Oramet and Camtek showing gains, while Teva and Elbit saw minor dips. Palo Alto Networks' stock initially surged after beating forecasts but later retreated. Dell Technologies' raised forecast could support local chip stocks.

Meanwhile, the Israeli Shekel continues to weaken against the dollar, trading at 3.036, a nearly 1% drop and a one-month low. Investors are advised to watch oil and real estate stocks following the Bank of Israel's quarter-point interest rate reduction to 3.25%.

Yesterday, the Tel Aviv Stock Exchange closed with gains, with the TA-35 index rising approximately 0.2% and the TA-90 index jumping 2.6%. Construction and real estate stocks, sensitive to financing costs, saw significant increases. The oil and gas index also climbed due to US-Iran tensions and rising oil prices, while the defense index advanced. The insurance index, however, weakened.

Globally, Asian markets are trading lower this morning, led by technology and chip stocks, with the MSCI Asia-Pacific index down 1.5%. Japan's Nikkei is down 2.6%, and South Korea's Kospi has fallen over 3%. Hong Kong and Shanghai are down 1%. Wall Street futures are stable this morning after yesterday's declines, driven by fears of renewed inflation from rising oil prices and increasing bond yields. The Dow Jones fell 0.8%, the S&P 500 lost 0.6%, and the Nasdaq retreated 0.9%.

Government bond yields worldwide are climbing, hitting multi-decade highs. In Japan, 10-year bond yields surpassed 3%, a level not seen since 1996. In the UK, 10-year yields are above 5.2%, and in Germany, they reached a 15-year high of 3.36%. Wall Street is also experiencing rising yields, with 30-year Treasury yields exceeding 5% for days, a situation not seen since 2006. These trends are attributed to swelling government deficits, unclear fiscal policies, and resurgent inflation fears.

Energy markets are in focus amid heightened security tensions in the Persian Gulf and reports of oil tanker damage in the Strait of Hormuz. Brent crude is up 1% to around $95.5 per barrel, and WTI is up 0.9% to around $91, fueling concerns that oil prices could approach $100 per barrel again, especially if supply disruptions persist.

The Bank of Israel lowered its interest rate to 3.25%, citing moderating inflation and a slowdown in economic activity after a strong first half. In the US, expectations are rising for a potential Federal Reserve interest rate hike in September, following Fed Chair Jerome Powell's Jackson Hole speech. US job openings in July, while up from June, remained lower than expected, indicating a continued cooling of the labor market ahead of the monthly jobs report.