The Tel Aviv stock market is climbing as missiles fly. Behind the charts is a global bet that this war with Iran will redraw the region and that Israel will emerge stronger.<\/p>\n
As air raid sirens wail across Israel and footage of missile interceptions dominate the Israeli news, something entirely unexpected is happening to the Tel Aviv Stock Exchange: it\u2019s rising.<\/p>\n
Since Sunday, Israel\u2019s main stock index has been rising steadily. The shekel has strengthened, and the cost of insuring Israel\u2019s government debt has decreased. In simple terms, the financial markets are showing unexpected confidence, even though the country is deep into its sixth day of direct war with Iran.<\/p>\n
\u201cThis is a war\u2014not an operation, not a campaign,\u201d Adrian Filut, an economist at the Hebrew University of Jerusalem, told The Media Line. \u201cIt\u2019s a war between two countries. And in a matter of hours, both went all in.\u201d<\/p>\n
According to Filut, who\u2019s also chief economic commentator at Calcalist, a leading Israeli financial daily, what makes this moment unique is not just the severity of the conflict but the way markets have chosen to respond. \u201cMarkets are not reacting to the present\u2014they\u2019re reacting to the future. What you\u2019re seeing is the repricing of the new Israel or the new Middle East,\u201d he said.<\/p>\n
\nIf you had asked someone six days ago what would happen to these three market indicators, they would have told you the exact opposite of what we\u2019re seeing now.<\/p>\n<\/blockquote>\n
The investor logic, Filut explains, hinges on expectation, with markets making the bet that Israel will win this war. Positive indicators include the strength of the shekel; the Tel Aviv 35 index, a benchmark of Israel\u2019s largest publicly traded companies; and credit default swap spreads, which reflect the perceived risk of government debt. \u201cIf you had asked someone six days ago what would happen to these three market indicators, they would have told you the exact opposite of what we\u2019re seeing now,\u201d Filut said.<\/p>\n
\u201cWe don\u2019t know exactly how\u2014whether the regime collapses, or whether the IDF disables Fordow or Natanz, or something else entirely. But the assumption now embedded in the market is that there won\u2019t be a Hamas, there won\u2019t be Syria, and Iran will be diminished,\u201d he added. \u201cThat\u2019s a new regional order.\u201d<\/p>\n
Similarly, Avi Hasson, CEO of Startup Nation Central, highlighted the resilience of Israel\u2019s high-tech sector amid ongoing conflict. Despite more than a year of constant conflict, the tech economy has shown \u201cconsistent growth and deal flow,\u201d he said.<\/p>\n
\u201cIsraeli founders have proven they know how to operate in uncertainty,\u201d Hasson said. \u201cThey adapt quickly, stay focused, and continue to execute. The resilience we\u2019re seeing is not a one-off. It\u2019s embedded in how this ecosystem works; we still deliver no matter what.\u201d<\/p>\n
He explained that despite the escalation of conflict into a direct war with Iran, Israel\u2019s startup sector is not fazed. The Israeli software company Wix recently announced an $80 million acquisition of the backend developer tool Base44, and the Israeli social trading company eToro completed an initial public offering on Nasdaq. \u201cThe offering was significantly oversubscribed, signaling continued investor confidence in the fundamentals of Israeli tech,\u201d Hasson said.<\/p>\n
But this bullish sentiment is at odds with the reality on the ground, where Israel is incurring enormous daily costs.<\/p>\n
\u201cThe cost of a partially closed economy is about 1 billion shekels [$290 million] per day,\u201d said Davey Disatnik, a professor at Tel Aviv University and a member of the Tel Aviv municipal council. \u201cRight now, only emergency businesses are operating. That\u2019s part of the reason the Home Front Command changed its guidelines after several days.\u201d<\/p>\n
Disatnik emphasized that even as the stock market climbs, core sectors remain frozen. \u201cWe are in a state of emergency,\u201d he told The Media Line. \u201cSchools are closed. Public transportation is still not fully functioning. Many workplaces remain shut unless they have access to protected spaces.\u201d<\/p>\n
Despite the military precision of Israel\u2019s air campaign, the war is disrupting daily life in Israel in ways not seen even during extended campaigns in Gaza. \u201cIn Gaza, wars dragged on, but the economy kept running,\u201d Disatnik said. \u201cThis is different.\u201d<\/p>\n
\u201cThere are already reports suggesting the defense budget could jump to 200 billion shekels [$57 billion] this year,\u201d Disatnik noted. \u201cThis includes not just military operations, but also reconstruction, evacuee compensation, and financial aid for affected populations.\u201d<\/p>\n
One of the most concerning aspects is the limited capacity of Israel\u2019s existing emergency funds. Dillard noted that only 9 billion shekels, or about $2.6 billion, are left in Israel\u2019s property tax compensation fund after distributing some 20 billion shekels, or $5.7 billion, over the course of the war with Hamas.<\/p>\n
Macroeconomically, there may be structural vulnerability beneath Israel\u2019s resilient surface. Filut warned that fiscal policy may be Israel\u2019s Achilles\u2019 heel.<\/p>\n
\u201cPublic debt is now at 70% of GDP, which is extremely high for a country with Israel\u2019s risk profile,\u201d Filut said. \u201cThis year, we\u2019ll pay 57 billion shekels [$16 billion] just in interest on that debt\u20147 billion [$2 billion] more than last year.\u201d<\/p>\n
He did not mince words when it came to fiscal leadership, saying that Finance Minister Bezalel Smotrich \u201chasn\u2019t demonstrated competence.\u201d \u201cCoalition funds are being allocated heavily into sectors like the ultra-Orthodox education system, which in many cases doesn\u2019t teach math, English, or physics,\u201d he said. \u201cThat weakens long-term productivity and workforce participation.\u201d<\/p>\n
Still, both Filut and Disatnik acknowledged that the markets may be on to something.<\/p>\n
\nThe idea is that if Iran is weakened, the region changes. If a new Middle East emerges\u2014if there\u2019s Saudi-Israeli normalization, if Iranian proxies are pushed back\u2014that\u2019s good for the economy in the long run.<\/p>\n<\/blockquote>\n
\u201cThere\u2019s logic behind the optimism,\u201d Disatnik said. \u201cThe idea is that if Iran is weakened, the region changes. If a new Middle East emerges\u2014if there\u2019s Saudi-Israeli normalization, if Iranian proxies are pushed back\u2014that\u2019s good for the economy in the long run. But it\u2019s very hard to quantify that right now.\u201d<\/p>\n
He believes markets may also be pricing in external intervention. \u201cIt\u2019s possible the stock market is also assuming the Americans will get involved,\u201d he said. \u201cThat would shorten the war, and investors may be expecting that. It\u2019s consistent with how quickly things have recovered since Sunday.\u201d<\/p>\n
But if the war drags on, both experts warned, all bets could be off.<\/p>\n
\u201cThe success of Israel\u2019s military campaign depends on one variable: duration,\u201d Filut said. \u201cEverything you\u2019ve seen\u2014the strategy, the precision, the overwhelming advantage\u2014it only holds as long as the war is short. The moment it stretches out, support starts to weaken.\u201d<\/p>\n
\u201cStatistically, the longer a campaign continues, the higher the chance something goes wrong,\u201d he said,<\/p>\n
Disatnik agreed. \u201cIf the conflict extends and the sense of achievement begins to erode, then the market\u2019s confidence may not hold. The perception of success is fragile.\u201d<\/p>\n
\nIran produces 3.3 million barrels of oil per day. That\u2019s 100 million per month or 1.2 billion per year. The world economy cannot function in peace without that volume.<\/p>\n<\/blockquote>\n
And then there\u2019s the global dimension: oil. Filut was blunt: \u201cIran produces 3.3 million barrels of oil per day. That\u2019s 100 million per month or 1.2 billion per year. The world economy cannot function in peace without that volume.\u201d<\/p>\n
While Iran is not the world\u2019s top producer, it is a critical supplier, and even minor disruptions can have a ripple effect globally. \u201cIf Iranian oil disappears from the market, prices will rise. The only question is how much,\u201d Filut said.<\/p>\n
So far, Brent crude oil has risen about 12% since the war began to nearly $78 per barrel. \u201cI would have thought we\u2019d already be in the $80 to $85 per barrel range by now,\u201d Filut said. \u201cBut we\u2019re not there yet. If it hits 85, we\u2019re in a new scenario. If it reaches 90 or more, it becomes politically and economically unsustainable.\u201d<\/p>\n
Filut believes that the memory of the Ukraine war and the resulting inflation spike still haunts Western capitals. \u201cGovernments paid a heavy political price to control inflation after Ukraine, and they haven\u2019t fully succeeded. Interest rates are still high, and central banks are hesitant to cut them. They simply cannot afford another inflation wave\u2014especially not one driven by oil,\u201d he said.<\/p>\n
That dynamic is also limiting how long the West will tolerate this conflict, he said. \u201cThe US and Europe won\u2019t let this go on too long. If oil hits 100 or 110, it\u2019s game over. The geopolitical cost becomes too high,\u201d he explained.<\/p>\n
Filut expressed doubt that worst-case scenarios would materialize. \u201cThis isn\u2019t really a war between two countries. It appears to be the case, but in reality, it\u2019s a complex conflict involving multiple players and international stakes. The only actors who benefit from a prolonged war are Putin and the oil-exporting states,\u201d he said.<\/p>\n
Were he adviser to Prime Minister Benjamin Netanyahu, he would urge him to end the war quickly, frame it as a strategic victory, and hold elections immediately, Filut said.<\/p>\n
\u201cThis war was prepared meticulously. For at least 20 years, Israel has anticipated this moment. The execution was brilliant. This is Netanyahu\u2019s opportunity to replace the memory of October 7 with June 13,\u201d he said.<\/p>\n
As the war enters its second week, the market still believes. But the clock is ticking. The bet on a new Middle East is a high-stakes one\u2014and it\u2019s not yet clear whether it will pay off.<\/p>\n","protected":false},"excerpt":{"rendered":"The Tel Aviv stock market is climbing as missiles fly. Behind the charts is a global bet that…\n","protected":false},"author":2,"featured_media":198026,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3091],"tags":[51,2441,16,15],"class_list":{"0":"post-198025","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-business","9":"tag-markets","10":"tag-uk","11":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114711905293167596","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/198025","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=198025"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/198025\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/198026"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=198025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=198025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=198025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}