Analysts optimistic war will have positive impact on markets

The Tel Aviv Stock Exchange (TASE) will open for trading Monday, and investment houses are trying to predict how the market will react to the Iran operation launched yesterday morning, and whether to move investments. The Tel Aviv-35 index fell 2.5% last week, also due to investors’ estimates that an attack against Iran was imminent.

Meanwhile, the global price of oil is rising by more than 2%, towards $67 per barrel. There is no foreign exchange trading today, while on Friday, the representative shekel-dollar exchange rate rose 0.4% to NIS 3.12/$ and continued to climb in after-hours trading to NIS 3.13/$, as assessments increased that an attack was imminent, following the evacuation announcement issued by the US ambassador to Israel. All arbitrage stocks are pushing the TASE down slightly by 0.2% at the start of the trading week. But it is quite clear that this effect is negligible, compared how the markets might react to the war.

“Since the previous Iran campaign, the TASE has risen about 50%”

“What do you do with the investments?” ‏Matan Shitrit‏, ‏Chief Economist at Phoenix Financial‏ asks and answers, “In general, nothing. It seems the domestic market already ‘sniffed’ something even before the attack – as reflected in the declines recorded over the past week, in shekel depreciation, increased bond market yields, an increase in risk premium (CDS), and also in increased protective (PUT options) costs.

“As we also wrote in the first campaign in June, in the short term everything depends mainly on the intensity of the event and the length of time that economic activity will be affected/shut down. Note that this time, the event is happening when the market is relatively expensive (a high multiplier environment), so initial sensitivity may be higher. But beyond the immediate noise, history usually tells a different story; after the dust settles, markets tend to return to a positive trend, especially when there is a sense that the event is creating more certainty, and certainly if it is perceived as a turning point. Simply put: since the previous campaign, the local stock market has risen by about 50%.”

The opening of the trading week in Tel Aviv on Monday depends to a large extent on what happens in the next 24 hours, adds Bank Hapoalim Chief Strategist Modi Shafrir. According to Shafrir, the trend “Depends on the results and the success of the attack that will become clearer and clearer. At the moment, it seems at first glance that the combined attack by Israel and the US has succeeded. Assuming the news is positive, despite the confusion, I estimate that the stock exchange will open positively. On the other hand, if tomorrow’s developments are unfavorable- if there are significant casualties and the regime in Iran is not successfully overthrown, the stock market may open negatively, accompanied by a weakening of the shekel.”

“If there is a fundamental change, there will be a positive effect”

According to Ronen Menachem, Chief Markets Economist at Mizrahi Tefahot Bank, “The event is in its early stages, so it’s too early to assess its full ramifications. If and to the extent that the campaign continues and expands, especially if additional entities join, we cannot rule out a scenario of significant damage to economic activity and markets. But this is not necessarily the main scenario. In the short term, there may be high volatility, stock market declines, shekel depreciation, and increased oil prices. Lowering the interest rate and improving the credit rating may be delayed. In the long term, if a substantial regional change is achieved, it could have a positive impact on the economy and investments.”

“The stock market,” Menachem adds, “may react, at first, with declines, due to the increase in risk aversion. Declines in the stock market, if any, may focus on sectors that have risen more than others in recent months (realization of profits). On the other hand, it is possible that defense industry shares will overperform. Shares of companies that are sensitive to the interest rate and the cost of credit may be among those the losers. That’s the case with the construction sector. The aviation and hotel sectors will also be affected. In the natural gas market, the consequences of reduced production should be monitored for security reasons. It is reasonable to assume that this time, too, and even more so than in the past, foreign airlines will hesitate before they resume operating in Israel.”

“In his statement, the prime minister said that the working assumption is that the campaign is liable to be a long one, and therefore any comparison with the results of Operation Rising Lion (in June) is not necessarily in place and may even be misleading. Past experience indicates that the public is stocking up on essential products, which will impact retail and food chain revenue. A prolonged operation will make it difficult for the Bank of Israel to cut the interest rate, since security quiet is necessary for economic recovery and rapid growth. You may recall that in the recent interest rate announcement, tensions over security ranked at the top of the list; caution is needed before further lowering the interest rate.”

Menachem stresses, “From a medium to long-term perspective, assuming that the operation succeeds and the Iranian regime collapses, or is substantially harmed, this will inject confidence into the economy, the business environment, investments in the economy (local and foreign), as well as the TASE and forex markets. Shekel appreciation will make it easier for the Bank of Israel to renew interest rate cuts. The point is that the continuation of the political process and its expansion into a regional process involves removing the Iranian element from the equation, and any development that comes close will be received positively at the end of the day. Right now, it’s a question of the dynamics that will affect the market until a conclusion is reached. Obviously, in the meanwhile, the market will be characterized by higher than usual volatility.”

Eldad Tamir, founder of investment house Tamir Fishman, notes, “We are in a period of great uncertainty where, should the Iranian regime fall, it will be great for the Israeli economy. But it’s still not possible to really assess the results of a war of this magnitude. In the short term, energy prices will rise, the dollar is expected to strengthen, and stock markets will fall. We recommend that no one make any moves in their savings or investments. Any action in the short term is meaningless.”

Published by Globes, Israel business news – en.globes.co.il – on March 1, 2026.

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