Experts Weigh Impact of Israeli Election on Shekel and Regional Stability
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Foreign investors anticipate that Israel's October 27 election results could impact the shekel's exchange rate by up to 3%. Analysts suggest an opposition win might strengthen the currency and improve regional relations, while a Netanyahu victory could increase tensions with Iran. Despite concerns over war costs and reduced foreign holdings in Israeli stocks, some investors remain optimistic about Israeli bonds and the economy.
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- Foreign investors expect Israeli election results to impact the shekel by up to 3%.
- An opposition victory could strengthen the shekel and improve Israel's regional relations.
- Netanyahu's re-election might increase the likelihood of escalation with Iran, experts say.
- Bill Ackman believes a government without Ben-Gvir and Smotrich signals a new chapter for Israel.
- Global funds' holdings of Israeli stocks have fallen to historic lows since 2023.
- War costs have exceeded $55 billion, according to the Bank of Israel.
- Some investors see Lebanese bonds as a way to benefit from a weakened Netanyahu government.
Foreign investors are closely watching Israel's upcoming Knesset elections on October 27, with opinions divided on how the results will affect the Israeli shekel and regional dynamics. Some analysts believe an opposition victory could strengthen the currency, while a continued government led by Benjamin Netanyahu might weaken it. JPMorgan estimates the election outcome could cause a currency fluctuation of up to 3%, suggesting a change in leadership could improve Israel's international relations, reduce regional tensions, and boost the shekel and capital markets.
Charlie Robertson of Equity Bank highlighted the regional implications, stating that Netanyahu's re-election could increase the likelihood of escalation with Iran, whereas his defeat might signal de-escalation. Billionaire Bill Ackman suggested that a government formed without Itamar Ben-Gvir and Bezalel Smotrich would indicate Israel is "turning a new page," potentially restoring its international standing and expanding the Abraham Accords.
However, not all investors anticipate a downturn if Netanyahu remains in power. Sergey Dergachev from Union Investment is buying Israeli bonds before the election, citing confidence in the Israeli economy and companies, and expects regional conflicts to eventually subside. Despite a recent surge in the Israeli capital market, global funds' holdings of Israeli stocks have fallen to historic lows since 2023, according to Copley Fund Research.
Christopher Granville of TS Lombard pointed to the significant economic costs of the war, exceeding $55 billion by last year according to the Bank of Israel. Some investors are looking for opportunities related to the election's outcome in other Middle Eastern countries. Jean-Charles Sambour of TT International sees a potential benefit for Lebanese bonds if the opposition wins or Netanyahu's government weakens, suggesting it as an indirect investment strategy.
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