Tel Aviv Stock Exchange Expected to Open Lower Amid US-Iran Tensions and Rising Oil Prices

The Tel Aviv Stock Exchange is forecasted to open with declines, reflecting negative arbitrage gaps from Wall Street, where dual-listed stocks like Tower and NICE are expected to drop by approximately 3% and 2%, respectively. Global markets opened lower due to escalating tensions between the US and Iran, including President Trump's threat to bomb Oman and reports of Iran considering a shift from defensive to offensive policies. This geopolitical strain has pushed oil prices higher and US government bond yields to near two-decade highs, fueling inflation concerns.

Asian markets also fell sharply, with Tokyo down 1.8%, Hong Kong 0.8%, Shanghai 0.4%, and Seoul 0.5%. US futures indicate further declines in major indices. The Tel Aviv 35 index fell 0.7% yesterday, with the Tel Aviv 125 and 90 indices dropping 1.1% and 2.7%, respectively. The cleantech sector led losses with a 3.7% drop despite strong year-to-date gains. Real estate, construction, and banking sectors also declined, with Bank Leumi and Mizrahi Tefahot leading the banking losses. Insurance stocks, led by Migdal’s positive Q2 results, were the only sector to close higher.

Analysts attribute the banking sector's weakness to fears of imminent interest rate cuts, which could compress credit margins, supported by recent inflation data showing a moderate 1.5% annual rate. Additionally, credit loss expenses for banks surged 72% quarter-over-quarter, signaling potential economic deterioration. Some market participants link this to increased credit lines extended to contractors struggling to sell apartments.

In commodities and currency markets, the shekel weakened against the dollar amid geopolitical tensions, trading above 2.97 shekels per dollar. Brent crude oil prices rose to around $91 per barrel, with WTI near $84, continuing an upward trend driven by Middle East risks. However, demand concerns and record US commercial oil inventories temper the market’s reaction.

On the macroeconomic front, inflation in Israel is expected to rise from its current subdued level due to temporary factors fading and a tight labor market. Investors await the Federal Reserve’s upcoming meeting minutes for clues on future monetary policy. Meanwhile, strong earnings season in the US has lifted optimism, with Evercore ISI projecting the S&P 500 could reach 9,000 points within a year, citing a diversified market and absence of typical bear market signals.