Tel Aviv Stock Exchange Faces Pressure Amid Middle East Tensions and Global Tech Sell-Off

The Tel Aviv Stock Exchange (TASE) opened with a cautious tone as investors focused on escalating Middle East tensions following Iranian missile attacks on oil tankers near the Strait of Hormuz. The United States responded with strikes on multiple Iranian targets and reinstated sanctions on Iranian oil sales, intensifying geopolitical risks. Global markets, including Asian and Wall Street exchanges, showed no recovery after sharp declines the previous day. Oil prices surged, with August WTI crude rising 2.1% to $72 per barrel and Brent crude up 1.9% to $75.5 per barrel. The Israeli shekel weakened to a two-month low against the dollar at 3.04, partially cushioning the local market.

Yesterday, TASE closed lower, led by technology and cleantech stocks amid global concerns sparked by Samsung's earnings report, which raised fears of a slowdown in the AI and semiconductor sectors. The TA-35 and TA-90 indices fell by 1.9% and 2.1%, respectively, with the technology index plunging nearly 3.9%. Cleantech and energy infrastructure stocks also declined about 3.6% each. Banks were a rare bright spot, gaining 1.4%. Major tech stocks such as Camtek, PriorTec, Nova, and Tower dropped over 7.9%, while energy company Mishak Energy fell 9.6%. On the upside, AIAS surged following government approval of the international aviation "Airpark" project, and Electreon rose after submitting a wireless charging project proposal in France. RP Optical gained on a new European defense contract, and Kando Drones completed a successful IPO. Insurance company Menora Mivtachim shares declined after Israeli police froze millions of shekels belonging to senior executives amid a corruption investigation.

In Asia, markets showed mixed performance with Japan’s Nikkei down 0.55%, South Korea’s Kospi dropping 3%, and Hong Kong’s Hang Seng rising 1.2%. U.S. futures traded relatively flat as investors balanced Middle East risks against anticipation of the Federal Reserve’s latest rate meeting minutes. Wall Street closed lower yesterday, pressured by semiconductor stocks amid rotation away from AI-related equities. The SOXX ETF and major chipmakers like Micron, Marvell, Broadcom, and AMD led declines. Samsung’s nearly 7% plunge in South Korea contributed to the negative sentiment, compounded by reports that Chinese company DeepSig is developing its own AI chip, potentially reducing reliance on Nvidia and Samsung.

In the bond market, Israeli government bonds saw slight declines with yields above 2.9%, reflecting diminished expectations for sharp rate cuts by the Bank of Israel. The country’s credit risk premium (CDS) rose to 90 points amid shekel weakness and geopolitical tensions. In the U.S., tech giants are increasingly issuing large bond offerings to finance massive AI infrastructure investments. Amazon recently raised at least $25 billion in bonds, following a $37 billion issuance four months earlier, joining Nvidia, Alphabet, Meta, and Oracle in tapping debt markets. Analysts question whether this AI investment surge will be funded by future cash flow or increased leverage.

The shekel’s sharp depreciation is linked to the Bank of Israel’s June interventions, geopolitical concerns, and expectations of further rate cuts. The central bank lowered interest rates to 3.5%, with forecasts suggesting possible reductions to 3% within a year, depending on inflation and currency trends. However, heightened security risks could delay further cuts. In the U.S., consumer inflation expectations rose to nearly three-year highs in June, potentially tempering Federal Reserve rate cut plans.

SpaceX’s recent inclusion in the Nasdaq 100 index was met with a 5% share price drop, despite positive analyst coverage from Morgan Stanley and Bank of America. Morgan Stanley assigned a "overweight" rating with a $300 target price, citing SpaceX’s strong position in AI infrastructure and space economy growth, projecting revenues exceeding $3.3 trillion by 2040. Risks include founder dependence, regulatory uncertainties, and funding needs. Bank of America also recommended buying with a $235 target. Both highlight SpaceX’s competitive advantages in reusable launch vehicles, vertical integration, and government contracts, while noting execution and regulatory risks. The company is expected to reach free cash flow break-even between 2030 and 2031, requiring significant capital raises to support AI ambitions.