Tel Aviv Shares Fall as Traders Weigh U.S.-Iran Ceasefire Deal

After the morning announcement of a U.S.-Iran agreement, traders initially expected Tel Aviv stocks to rise with global markets. But about an hour after the opening, the direction reversed, and the main indexes were down about 1%. Bank shares fell 2%, and insurance stocks dropped 2.5%.

Ren Goldring, head of investments and deputy CEO at Analyst Investment House, said Israel’s market does not yet know how to absorb the deal. In his view, most interpretations are that it is less favorable for Israel and limits its freedom of action. He also said valuations in Israel have already reached a balance with the rest of the world, prices are no longer cheap as they were before Operation Pager, and the post-operation optimism has faded. He added that rates are likely to fall because inflation is declining, which would be negative for banks.

Idit Moskovitz, head of trading rooms at Banco Internacional, said the deal does not appear to remove long-term security threats for Israel, which had supported the shekel. She said a deal that does not serve Israel, including diplomatic dictates over military activity in different arenas and the resulting threat to national security, could weaken the currency, although continued gains in U.S. markets and ongoing hedging by institutional investors would keep supporting it.

Despite the stock decline, the shekel strengthened. The broader market mood was upbeat, with major global equity indexes rising sharply, while lower oil and natural-gas prices reduced expectations for a U.S. rate hike and weakened the dollar. Modi Shafrir, chief markets strategist at Bank Hapoalim, said the ceasefire agreement is expected to be signed Friday in Geneva and would allow free passage through the Strait of Hormuz without fees and lift the blockade on Iranian ports. He noted, however, that the parties’ versions differ, with Iran saying the ceasefire will also include Lebanon. Goldring added that the deal could still help Israel by ending the war, allowing reserve soldiers to be released, cutting ongoing defense spending, and reopening airspace, but said Israel is now in a somewhat worse position than it was two to three months ago and will have to wait up to 60 days to see how negotiations develop.