Trading on the Tel Aviv Stock Exchange opened today (Sunday) with sharp declines: the TA-35 Index falls by 2.25%, the TA-90 Index falls by more than 3%, and the Banks Index loses 2.1% of its value. There is no foreign exchange trading today, and yesterday the dollar approached NIS 3.98 levels, against the background of the war and the warming in the northern sector.
It should be noted that during the past week, the leading indices on the Tel Aviv Stock Exchange "stabilized" relatively and there were no sharp declines, except for the first day of fighting, when there were falls of more than 6 percent.
Ronen Menachem, chief market economist at Mizrahi Tefahot, explained that the trend is caused by an "iron sword" war, which causes excessive volatility, as well as the threat of Iran's foreign minister, who said it would act if IDF forces entered the Gaza Strip.
IDF attack on Lebanese territory, today // Photo: IDF Spokesperson
In a conversation with Israel Hayom, Menachem said, "The declines this morning in the stock market should be seen as part of the very sharp volatility that has plagued the market since the beginning of the war – in every direction. This is likely to continue. In this sense, movement of plus-minus percent will be more frequent."
He adds: "This must be examined in light of the warming on the northern border, and to this we must add Iran's foreign minister's warning that it will act if IDF forces enter the Gaza Strip. If and as the likelihood of a multi-front event increases, the negative impact on the stock market could expand."
Tel Aviv Stock Exchange (archive), photo: Coco
Negative market sentiment
According to Menachem, "The second-line stocks are the ones leading the declines this morning, which indicates the negative sentiment in the market. The declines focus on stocks related to domestic activity and business turnover (such as real estate and construction), and less so on stocks whose activity is directed and more related abroad, or which is less related to security tensions."
The economist also noted that there is already talk in the economic discourse about a real negative impact on GDP and a jump in the deficit to the proportions we knew during the COVID-19 pandemic. "This discourse also has a significant impact on market sentiments," he said. "Finally, you have to take into account the declines on Wall Street over the weekend, including dual stocks."
According to a senior source in the capital market, "The token is beginning to fall that this is not another operation in Gaza. Hamas came prepared, and they are also ready on the ground, all under Iran's guidance. In addition, it seems that Lebanon is heating up the sector and may be trying to force Israel to start a campaign there, for example because of the anti-tank missile fired at Shtula today. The market realized that it probably did not price in the possibility of a campaign with Lebanon, because the declines recorded last week only balanced the increase in recent weeks. Therefore, after a difficult weekend, the market understands that there is a much bigger story here than they thought. It is worth noting that the general public has not yet left the markets."
An IDF tank near the Lebanese border, photo: AFP
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