Israel Stocks Extend Drop In Longest Losing Streak In 18 Months

The selloff in Israeli stocks stretched into a sixth day, the longest run in 18 months, with investors increasingly concerned about the economic impact of the war in Gaza. 

The Tel Aviv Stock Exchange 35 Index sank 1.8%, bringing the total retreat since Sept. 9 to 4.3%. While equity investors have been steadily pulling away from the market this week, there’s been little movement in Israel shekel or dollar bonds. 

The European Union has proposed suspending Israel’s preferential trade benefits, meaning it would be charged the same tariff rate as other nations that don’t have a trade accord with the bloc, according to a commission statement on Wednesday. In comments earlier this week, Prime Minister Benjamin Netanyahu acknowledged Israel’s seclusion and underscored the need for self-reliance to withstand any sanctions.  

The Israeli premier later clarified that he was specifically referring to security independence and was misunderstood in a way that “allegedly rattled markets,” then reiterated that Israel will build an independent, powerful arms industry to fulfill its military needs.

Investor sentiment is for now shifting from the resilience that took hold in the wake of Hamas’s Oct. 7, 2023, attack on Israel. After panic selling in the immediate aftermath, the Tel Aviv index rebounded and had rallied 83% through last week — adding more than $200 billion to shareholder wealth. 

However, market optimism hit a wall in the past few days as Israel came under criticism from the US as well as a growing comity of friendly nations for its intense push into Gaza City and an attack in Qatar. 

The market has missed out on a recent rally in global stocks driven by expectations for Federal Reserve interest rate cuts. The six-day retreat in the Tel Aviv index ranks as the steepest among global benchmarks tracked by Bloomberg.