Markets Plunge as Dollar Surges; Experts Advise Investors

Global and Israeli markets experienced significant turmoil on Thursday, with Wall Street declining, the Tel Aviv Stock Exchange plummeting, and the dollar rapidly appreciating against the shekel, nearing 3.20 shekels for the first time since December 2025. Analysts attribute the sharp downturn to a combination of factors, including a correction in the U.S. market, local Israeli economic concerns, and a weakening shekel.

Eldad Tamir, CEO of Tamir Fishman Investment House and FINQ, linked the Israeli market's decline to a shift in investor sentiment. He noted that initial optimism about Israel's enemies' defeat and potential peace with Saudi Arabia has faded, with recent election results and the strengthening of democratic forces, some perceived as anti-Zionist, marking a turning point. Tamir also cited the deepening real estate crisis as a factor contributing to financial system instability and fear-driven market drops. He advised investors to remain calm and hold their positions, emphasizing that markets historically average a 10% annual return and timing entry and exit is impossible.

Yossi Menashe, Co-CEO of Altshuler Shaham Financial Services, highlighted that the shekel's depreciation is significantly outpacing the global dollar strengthening. He pointed to local factors as the primary drivers, including uncertainty surrounding government formation, the potential for political stagnation or new elections, increased risk of escalation with Iran, a widening interest rate gap favoring the dollar, and the sharp declines on Wall Street. Menashe also noted that falling overseas stock values can force institutional investors to buy dollars for hedging and margin calls, further pressuring the shekel.

Yossi Frank, CEO of Energy Finance, echoed the sentiment that institutional investors are a key driver of the shekel's weakness. He explained that these institutions are compelled to buy large amounts of dollars as U.S. stock markets fall, a situation exacerbated by their hedging strategies. Frank believes the dollar-shekel pair has reached its equilibrium but warned of further sharp depreciation if U.S. market declines continue or if a crisis in Iran escalates.

Shachar Chen, an analyst at Bank Leumi, attributed the shekel's recent 2.7% weakening partly to a rise in Israel's risk premium to about 1%, driven by security concerns and potential conflict with Iran. He also noted that global and local stock markets have seen broad declines, with U.S. indices losing between 2.5% and 5.3% and Israeli indices dropping around 6.5%. Chen suggested that these price drops are creating more attractive investment opportunities and advised investors to ignore short-term noise, as historical data shows a consistent upward trend in leading stock indices over the long term.

Conversely, the Manufacturers Association of Israel welcomed the dollar's rise to 3.20 shekels, viewing it as a positive development for Israeli industry. They believe it will provide breathing room for factories, improve exporter competitiveness in the short term, and help small and medium-sized businesses cope with rising costs. However, the association stressed that exchange rate fluctuations alone are insufficient for long-term industrial resilience and called for consistent economic policy and monitoring by the Bank of Israel and the Ministry of Finance. They also pointed to substantial foreign investments by pension and savings funds as creating ongoing demand for foreign currency, necessitating strategic economic planning for sustained industrial stability and competitiveness.