Tel Aviv Stock Exchange Opens Amid Middle East Tensions and Anticipation of US Fed Rate Decision

The Tel Aviv Stock Exchange opened under the shadow of escalating Middle East tensions following Iran's ballistic missile attack on a US base in Jordan, marking the first such strike since President Trump paused attacks on Iran last Friday. This regional flare-up, combined with Houthi attacks on oil infrastructure and unusual incidents in the Red Sea, has raised fears of supply disruptions, pushing oil prices up by over 4%. Market participants are also highly alert ahead of the US Federal Reserve's interest rate decision scheduled for this evening, with Fed Chair Kevin Warsh's hawkish tone intensifying pressure on oil prices and creating uncertainty about future monetary policy moves.

Dual-listed stocks on the Tel Aviv market showed mixed trends, with positive arbitrage gaps in shares like NICE, Kamtek, Teva, and Palo Alto Networks, while semiconductor and technology stocks such as Nova and Tower Semiconductor faced downward pressure following sharp declines on Wall Street. Asian markets opened mostly lower, notably South Korea's Kospi index plunging 11%, led by SK Hynix and Samsung, while Hong Kong's Hang Seng index rose 1.3%. US futures indicated slight declines, with Nasdaq futures down 0.5%.

In Israel's bond market, government bond yields fell amid worsening equity market conditions, with the 10-year yield dropping to 3.879%. The shekel weakened slightly against the US dollar, which rose about 0.55% to 3.06 shekels. Brent crude oil surged to $87.82 per barrel, reflecting heightened geopolitical risks. Gold prices retreated 1.1% to around $4,032 an ounce due to a stronger dollar and investor caution ahead of the Fed decision.

Market analysts remain divided on the Fed's next move. While most expect no rate change today, Citadel Securities forecasts a 0.25% hike to reinforce Fed Chair Warsh's credibility in fighting inflation. The market currently prices a 69% chance of no change this week but a 77% chance of a hike by September. Locally, experts warn of significant uncertainty due to the new Fed chair's cautious communication and the impact of rising energy prices.

The Nasdaq 100 index is nearing correction territory after a rapid 1.6% drop yesterday, completing a swift decline from its June 2 peak in just 38 trading days. This sell-off is driven by concerns over high capital expenditures in AI infrastructure, competition from China in semiconductors, and doubts about returns on tech investments. Investors await earnings reports from major AI-focused companies Microsoft, Meta, and Amazon, which will likely set the short-term market direction. Technical indicators suggest weakening momentum, with key support at 27,308 points and resistance levels at 28,470 and 29,510 points critical for market stability.