Israeli Markets Reel Amid Global Turmoil, Analysts Advise Calm

Financial markets in Israel experienced significant turmoil on Thursday, November 5, with the Tel Aviv Stock Exchange plummeting and the dollar nearing 3.20 shekels, a level not seen since December 2025. This downturn coincided with a sharp correction in U.S. stock markets and a rapid weakening of the Israeli shekel. Eldad Tamir, CEO of Tamir Fishman and FINQ, attributed the Israeli stock market's fall to a shift in investor sentiment. He noted that after a period of excessive optimism about Israel's regional prospects and potential peace deals, a more realistic view emerged, influenced by election results and the political landscape in the U.S. Tamir also cited the deepening real estate crisis as a factor contributing to market fear and a subsequent flight to the dollar as a safe haven. He advised investors to remain calm and hold onto their investments, emphasizing that markets historically yield around 10% annually and attempting to time market exits and entries is futile.

Yossi Menashe, Co-CEO of Altshuler Shaham Financial Services, highlighted that the shekel's weakening significantly outpaced global dollar strengthening. He pointed to local factors such as uncertainty surrounding the new government formation, the risk of political deadlock, potential for renewed elections, increased risk of conflict escalation with Iran, and unfavorable interest rate differentials as primary drivers. Additionally, the decline in overseas stock values reduces the value of Israeli institutional investors' portfolios, potentially forcing them to buy dollars for hedging, further pressuring the shekel. Margin calls on dollar-denominated positions also contribute.

Yossi Frank, CEO of Energy Finance, echoed that institutional investors' actions are a major factor in the shekel's decline. He explained that these investors are caught in a bind, needing to buy more dollars as U.S. markets fall and reducing currency hedging as the shekel weakens. Frank believes the dollar-shekel pair has reached equilibrium but warned that further sharp declines are possible if U.S. markets continue to fall or if a crisis emerges concerning Iran. Shahar Hen, an analyst at Bank Leumi, noted the shekel's recent 2.7% weakening against the dollar, attributing it partly to a rise in Israel's risk premium due to security concerns and potential confrontation with Iran. He also mentioned institutional investors adjusting currency positions and hedging portfolios due to negative U.S. market dynamics. Hen advised investors to ignore market noise, stating that volatility is normal and long-term stock market indices tend to grow.

In contrast to investors' concerns, the Association of Industrialists in Israel welcomed the dollar's strengthening. They view it as beneficial for Israeli industry, boosting the competitiveness of exporters in the short term and helping businesses, especially SMEs, manage rising costs and invest in development. However, the association stressed that currency fluctuations alone are insufficient for long-term export sustainability, requiring consistent economic policy and monitoring by the Bank of Israel and Ministry of Finance. They also noted that large-scale foreign investments by Israeli pension and savings funds create sustained demand for foreign currency, necessitating appropriate economic policy measures.