Israeli Assets Plummet as Years of War Gains Fade with Peace Talks Expectations

On June 23, this month, the Israeli stock market and currency have become the worst-performing assets globally. The Israeli benchmark index TA-35 has plummeted over 12% in USD terms this month, marking the largest decline among major global stock indices. In percentage terms, the sell-off in June is set to be the most severe month since October 2023, when Hamas launched attacks on Israel, triggering a devastating war in Gaza. This nearly three-year-long intense regional conflict had previously led to a significant rise in Israeli assets, as investors bet on Israel achieving a safer situation that would drive economic growth. From November 2023 to the beginning of this month, the shekel appreciated by 42% against the dollar, making it the best-performing currency globally. The Israeli stock market nearly quadrupled, outperforming the South Korean KOSPI index, and ranked second globally only to Ghana. However, these gains are now narrowing. Since negotiations began between Iran and the U.S., the Israeli shekel has fallen about 5% against the dollar so far in June, marking the largest decline among global currencies. One of Israel's largest banks, Bank Hapoalim, stated that the agreements being reached between the U.S. and Iran are perceived by local investors as failing to improve Israel's long-term security situation. Notably, it has fallen far short of the high expectations formed during the early stages of military operations against Iran.