The effect of the war led to a freefall on the Tel Aviv Stock Exchange. The Tel Aviv 35 Index plummets by 6.5%, the Tel Aviv 90 Index falls 7%, and the Tel Aviv 125 Index also crashes by 6.5%.
There is no foreign exchange trading today, but according to options trading, the opening price tomorrow is expected to be 3.94, up 2.5% compared to Friday's close.
IDF Spokesman: Harming the Symbols of the Hamas Regime - We Are Also Deployed in the North // Shimon Yaish
Will trading stop? If the Tel Aviv 35 index drops by 8%, there will be a 30-minute break. At the moment, this indicator is down 4.7%. It should be noted that on the morning of the opening of trading on TASE, it was delayed due to expectations of sharp price declines. The situation is called "English Open" and is intended to moderate the declines in the opening of trading.
Chen Herzog, chief economist of BDO, a consulting firm, told Israel Hayom: "The security situation and the fatal damage to national resilience also directly affect economic resilience. The stock exchange and the capital markets reflect the economic situation and are expected to reflect, at least in the short term, the sense of deep fracture. Based on past experience, the direct cost of military operations is approximately NIS 1.5 billion per week of combat.
"However, the fact that the war this time is in the heart of civilian communities and not behind enemy lines is expected to cause greater economic damage than in previous security incidents. In the medium and long term, we hope that the Israeli economy will emerge united and strengthened from this difficult crisis."
"This time it will be difficult for the stock market to recover quickly"
According to Uri Greenfeld, Psagot Investment House's chief strategist, "In contrast to the various operations in the south in recent years, which had minimal impact on the markets, the war that began over the weekend is expected to have a more substantial impact. The reason for this is that the markets are ultimately a reflection of the Israeli economy, and if in previous operations in the south the Israeli economy was not significantly damaged, today such a scenario is too optimistic. Therefore, if in the past the reaction in the markets was for a day or two at most, it is reasonable to assume that this time we will see the domestic markets find it difficult to recover quickly."
Greenfeld explains that the expected negative impact on economic activity comes from two channels. "First, it is reasonable to assume that the war in Gaza will continue for a long period of time, a period during which it can also be assumed that a significant part of Israel will continue to be under missile threat. Such a threat will cause the Israeli consumer to go outside less and naturally reduce the volume of consumption. Moreover, at a time of such heavy uncertainty, it is reasonable to assume that the volume of investments in the economy, both by the private and public sectors, will also decline. Of course, all of these influences will only intensify if the number of sectors in which Israel is at war increases."
The shekel will weaken
Greenfeld continues: "Second, Israel finds itself in a situation in which it may be forced to make decisions that will not necessarily be acceptable to other countries in the world. International opinion on Israel has not been wary over the past year, and decisions of this kind, however necessary, may only further damage Israel's perception in the world."
Terrorists apprehended near the Gaza Strip, photo: Use under section 27a of the Copyright Law
Palestinians with an Israeli tank near the separation fence, photo: AFP
The scene of the fall in Tel Aviv, photo: Gideon Markowitz
IDF soldiers, photo: Oren Ben Hakon
"In such a situation, international investments in Israel and trade relations with recent countries may be adversely affected, which will be reflected in both economic activity and currency stability. Therefore, it is reasonable to assume that we will see the shekel weaken against the dollar and other currencies in the near future."
Greenfeld also mentions that the weakening of the shekel is also reflected in the strengthening of inflationary pressures, and that Moody's will update Israel's credit rating this Friday. "It is not certain that the outbreak of the war will have an immediate impact on the credit rating, since the rating companies are reluctant to make substantial changes during periods of uncertainty, but it will undoubtedly have an impact in Moody's discussions, and the longer the war continues, the greater the risk to Israel's credit rating."
Although the horizon for the Israeli market does not look good at the moment, we have learned time and time again in the past that making decisions about our long-term savings during such periods usually leads to losses rather than profits. Reducing exposure to markets today may save losses on paper, but since usually no one knows when the time is right to put money back on the market, in the end such moves hurt the saver.
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