Israeli Election Results Cause Dollar Surge, Stock Market Uncertainty

As the final results of the Israeli elections become clearer, it appears neither the "change bloc" nor the "Netanyahu bloc" secured a decisive victory. In contrast, the Israeli currency, the Shekel, reacted with sharp volatility. While the dollar weakened globally on Tuesday, it reached 3.03 Shekels in Israel. On Wednesday morning, with about a third of votes counted and the picture emerging that the change bloc did not achieve a sweeping win, the dollar strengthened to 3.09 Shekels. Although trading volume is currently low, it reflects investor sentiment. The stock market is expected to face scrutiny from investors within hours, as it typically tries to anticipate future trends. However, the current results present a complex scenario for the market to interpret. The high voter turnout suggests a public direction that may not necessarily encourage Western investors, particularly if they had hoped a change government would curb settler actions in the territories, potentially leading to economic sanctions against Israel. The article notes that Prime Minister Netanyahu's recent statements on cryptocurrency are now viewed as a significant red flag for the stock market, potentially pushing Israel towards using crypto like "pariah states" such as Iran and North Korea. This scenario could hinder Israel's technological development and competitive edge, especially given its lack of natural resources for producing military supplies. The article warns this is bad news for the stock market, the Israeli economy, startups, healthcare, and the cost of living. Another concern for Western investors is the apparent lack of electoral consequences for underperforming ministers, such as those in transportation, education, finance, and economy. This could embolden politicians to act with impunity, potentially unchecked even by the judiciary, a situation that Western investors find unfavorable. Furthermore, the defense budget is reportedly exceeding all limits, with no apparent change in Israel's security posture expected given the election outcomes. This implies increased reserve duty, reduced workdays, and the necessity for higher taxes to cover the deficit, potentially increasing Israel's bond yields and the cost of its debt. The article questions where these taxes will come from, suggesting companies, pension funds, or income tax. While the stock market might not react sharply on Wednesday, the long-term economic outlook for Israel appears unfavorable, with the public's electoral choices not benefiting the economy, especially with ministers feeling protected despite their failures. The article also briefly mentions that the US Federal Reserve's interest rate decision is due Wednesday, but suggests it will likely be of little interest to the Israeli public in light of domestic economic concerns.