Tel Aviv Stocks Slide as US and Europe Hit New Highs on Expected Iran Peace Deal

A closely watched expected agreement ending the war with Iran has lifted Wall Street and Europe to record levels, but the Tel Aviv Stock Exchange has moved in the opposite direction, falling sharply for two straight trading days. The local market dropped about 3% to 5% over the two sessions, and the exchange’s research unit said it had “disconnected from the trend abroad” as it digested the new security reality.

The global rally is being driven mainly by the prospect that the Strait of Hormuz, through which about one-fifth of the world’s oil supply used to pass daily before “Rage of the Lion,” will reopen after months of closure. Brent crude has fallen more than 5% since the start of the week and slipped below $80 a barrel for the first time since March. Lower fuel costs are expected to ease pressure on consumers in the US and, even more, in Europe, which was hit by higher oil and natural gas prices during the war.

Ronen Menachem, chief economist at Mizrahi Tefahot Bank, said investors abroad are focused only on oil prices, while in Israel “the emphases are completely different.” He said Israel is already relatively protected from energy swings because of its domestic natural-gas production, so falling oil prices bring less relief locally. He also said the deal may not meet all of Israel’s expectations, especially on nuclear issues and Lebanon, and that uncertainty over US-Israel relations is weighing on sentiment.

Menachem added that the updated Central Bureau of Statistics growth estimate worsened the mood, with the damage from “Rage of the Lion” now put at a 3.8% drop in GDP, compared with 3.3% a month ago. The weaker outlook is linked to private consumption and exports, which he called the economy’s “more painful” areas. Still, he warned against drawing quick conclusions after only two trading days, saying the Israeli market has often fallen before recovering. Attention now turns to the US Federal Reserve decision due later today, and to the Bank of Israel rate decision in early July.