US-Iran Tensions Drive Volatility as Tel Aviv Stock Exchange Opens Amid Global Market Uncertainty

The Tel Aviv Stock Exchange opened amid heightened geopolitical tensions following a significant US military strike on Iran's Revolutionary Guards in southern Iran. This escalation came after Iranian missile launches toward Jordan and direct threats from President Trump, who reportedly considers extending military operations to 10-14 days to neutralize Iran's missile capabilities. These developments have increased market caution, particularly regarding energy prices and regional stability.

Dual-listed Israeli tech stocks are expected to weigh on the Tel Aviv 35 index, with notable declines in chipmakers such as Tower Semiconductor (-6.3%) and Camtek (-4.4%). Conversely, Teva Pharmaceutical stands out with a positive gap of 1.2%, buoyed by strong Q2 earnings and an upward revision of its 2026 revenue forecast to $16.5-16.85 billion. Globally, Asian markets showed mixed performance, with Japan's Nikkei rising 0.5% while China and South Korea indices fell about 1.2%. US futures indicate modest gains ahead of earnings reports from major tech companies.

Israeli bond yields show a normal upward slope, with short-term yields slightly down and long-term yields marginally up. In the US, Treasury yields surged after the Federal Reserve kept interest rates steady at 3.75% but signaled possible hikes, reflecting inflation concerns amid rising oil prices and Middle East tensions. The 30-year US bond yield hit its highest level since 2007.

Oil prices retreated slightly after a sharp 7% jump amid the conflict escalation, as tankers reroute around the Middle East. The dollar strengthened against the shekel, reflecting increased geopolitical risk. Gold prices edged higher, benefiting from the Fed's cautious stance on inflation and rate hikes.

Fed Chair Kevin Warsh emphasized a firm commitment to a 2% inflation target, warning of further action if needed. The Fed's divided vote revealed three members advocating for immediate rate hikes. Israeli economists suggest geopolitical risks reduce the likelihood of rate cuts in the near term but foresee potential easing if tensions subside.

Investment strategist Robert Almeida of MFS Investment Management advises focusing on return on invested capital rather than central bank actions. He warns of profitability erosion in AI-driven tech sectors and highlights opportunities in traditional industries, software firms integral to AI infrastructure, life sciences, and consumer staples. Almeida draws parallels between current tech investment cycles and pre-2008 financial crisis dynamics, cautioning about supply chain impacts if market skepticism grows.

Today, key earnings reports from Bristol-Myers Squibb, Amazon, Apple, and Coinbase are expected, which may further influence market direction amid ongoing geopolitical and economic uncertainties.