Tel Aviv Stocks Near Worst Month Since October 2023 Amid US-Iran Tensions and Wall Street Slump
The start of the trading week is marked by escalating tensions between the US and Iran, the most severe since their June 17 memorandum of understanding. Iran fired on tankers in the Strait of Hormuz over the weekend, prompting US President Donald Trump to threaten Iran with destruction if military action becomes necessary. This geopolitical strain is impacting markets globally, including Israel, where investors are also reacting to the signing of a framework agreement between Israel and Lebanon.
Tel Aviv's stock market closed last week with a second consecutive decline, led by technology, semiconductor, and defense stocks. The TA-35 index fell about 2.8%, with the TA-125 and TA-90 indices down similarly. June is on track to be the worst month since October 2023, with the TA-35 down nearly 9.6% so far. Sector indices are all negative, with cleantech dropping over 17% this month despite leading year-to-date gains. In the US, the Nasdaq, heavily weighted in tech, fell 4.6% last week and is set for its weakest month since March 2025. The S&P 500 lost nearly 2%, while the Dow Jones gained slightly.
Semiconductor stocks notably declined after reports that OpenAI may delay its IPO until 2027 due to weak performance in related tech sectors. ETFs tracking semiconductors and major tech giants also saw significant drops. Meanwhile, oil prices plunged over 9% to pre-conflict levels despite recent Iranian attacks on a Taiwanese oil tanker. The Israeli shekel weakened against the dollar, which hit a one-year high amid expectations of US interest rate hikes continuing through 2026.
Investors await key US macroeconomic data this week, including consumer confidence, employment reports, and manufacturing indices. The official June employment report, due Thursday, is particularly critical as it will influence Federal Reserve monetary policy. Analysts expect continued job growth, which could increase pressure for further rate hikes. RBC Capital Markets and market strategists emphasize that labor market strength will determine the Fed's next moves.
Bank of America issued a cautious outlook, warning the S&P 500 could enter correction territory in Q3, potentially dropping over 6% from current levels. Their strategist noted weakening momentum indicators but maintained a generally bullish long-term view with a possible year-end rally. This contrasts with other major banks forecasting higher year-end targets. The cautious stance aligns with expectations of three Fed rate hikes this year, unlike peers predicting stable rates.
Overall, the combination of geopolitical risks, weak tech sector performance, and monetary policy uncertainty is creating a challenging environment for both Israeli and global markets as June draws to a close.
