Tel Aviv Stock Exchange Opens Week Amid Geopolitical Tensions and Market Volatility

The Tel Aviv Stock Exchange (TASE) is set to open the week with cautious investor sentiment due to fragile tensions between the US and Iran and ongoing disputes in northern Israel near Lebanon. Early reports indicate a temporary easing after the US and Iran agreed to halt hostilities and plan talks in Qatar this week, boosting global markets with Wall Street futures up to 0.7% and positive trends in Asia. However, the market remains wary of a rapid escalation. Dual-listed tech stocks Kamatak and Nova are expected to open down over 3%, while software companies Nice and Formula Systems could surge by 6.3% and 8%, respectively, following strong gains in US software stocks led by Microsoft and Salesforce.

Last week, TASE closed with a second consecutive weekly decline, with the TA-35 index down about 2.8%, TA-125 and TA-90 also falling over 3%. Technology, chip, and defense stocks led the losses, while biomed, insurance, and cleantech sectors posted gains. In Asia, markets showed mixed results, and US indices closed a five-day losing streak amid concerns over AI bubble risks, private credit markets, supply chain disruptions, and high interest rates. Despite strong earnings from chipmaker Micron, stocks like Apple and Microsoft fell sharply due to announced price hikes on key products, reflecting inflationary pressures.

In the bond market, SpaceX raised approximately $25 billion in a record-demand bond issuance, initially tightening risk spreads. However, secondary trading quickly reversed, with spreads widening and bond prices falling, signaling investor skepticism about the company's credit risk despite its high valuation and backing by Elon Musk. This contrasts with more stable bond market reactions to recent large tech issuances by Nvidia and Alphabet.

The Israeli shekel weakened about 1% against a basket of currencies this week, underperforming developed market peers due to factors including Bank of Israel dollar purchases, increased country risk premium, and a stronger US dollar. Oil prices rose over 1% amid fears of supply disruptions, despite recent declines linked to increased tanker traffic through the Strait of Hormuz and a temporary US license allowing Iran to sell oil internationally.

Macro strategist Mudi Shapir of Bank Hapoalim forecasts a modest 0.25% interest rate cut in July, citing easing core inflation and a strong shekel but noting risks from rising rents, a tight labor market, and hawkish global central banks. Key US economic data this week, especially the June employment report, will be closely watched for signals on Federal Reserve policy.

Tech CEOs Elon Musk and Tim Cook have recently warned of unprecedented inflationary pressures driven by soaring chip and AI infrastructure costs, which are spreading through supply chains and forcing widespread price increases. Cook described the situation as a "once-in-a-century event," while Musk called it the steepest price surge he has ever seen. These warnings highlight ongoing inflation risks despite recent moderation, impacting corporate profitability and consumer prices globally.