The benchmark TA-35 stock index fell as much as 2.7%, the most in a week, before slightly paring losses to be down about 2.5% at shortly before 1 p.m. local time. The Tel Aviv Stock Exchange is closed Friday and Saturday.
“Tension from an Iranian reaction after the twin strikes in Tehran and Beirut is still in place, on top of the global market selloff” at the end of last week, said Adi Babani, head of international sales and trading at Meitav Investments Ltd. in Tel Aviv.
US stocks plunged on Friday after weak employment data sparked worries of an economic slowdown and sowed concern the Federal Reserve isn’t moving quickly enough to lower interest rates.
At the same time, Israel is bracing for a possible attack from Iran, which threatened to avenge last week’s assassinations of Hamas and Hezbollah leaders. Hamas and Hezbollah are both designated by the US as terrorist organizations. Sunday’s biggest declines were in dual-traded technology shares, catching up to their plunge in New York on Friday. Nova Ltd. and Camtek Ltd., which both serve the semiconductor industry, slid by 11% each, while Tower Semiconductor Ltd. and Nice Ltd. were trading at about a 5% loss.
Ronen Menachem, chief markets economist at Mizrahi Tefahot Bank Ltd., attributed the slide to both the sharp drops in the US on Friday and “tremendous security tensions” in Israel.
“The market is expected to continue to be very nervous,” he said.
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Investors are wavering between two potential scenarios, Menachem said. In the first, the current escalation continues and damages local economic activity, as well as spreading to international markets. In the second, pressure on Israel from allies will build, and eventually a formula will be found that will lead to a cease-fire in Gaza.
In the latter case, Israeli shares may return to a trend of price increases and even over-performance compared to markets abroad, he said. The TA-35 index made a record high less than a month ago.
Regional tensions also hit other Middle Eastern stock markets starting their new trading week, including those in Egypt and Saudi Arabia.
