The benchmark TA-35 stock index fell as much as 2.7%, its biggest drop in a week, before paring losses slightly to around 2.5% shortly before 1 p.m. local time. The Tel Aviv Stock Exchange is closed on Friday and Saturday.
“Tensions remain high due to last weekend’s sharp sell-off in global stock markets and Iran’s response after the twin attacks in Tehran and Beirut,” said Adi Babani, head of international sales and trading at Meytab Investments in Tel Aviv.
U.S. stocks fell sharply on Friday as weak jobs data stoked fears of an economic slowdown and sparked worries that the Federal Reserve is not cutting interest rates fast enough.
At the same time, Israel is preparing for a possible attack from Iran, which has threatened retaliation for last week’s assassinations of leaders of Hamas and Hezbollah, both of which are designated terrorist organizations by the U.S. The biggest declines on Sunday were bilaterally traded technology stocks, trailing Friday’s sharp declines in New York. Semiconductor makers Nova Corp and Camtec Corp fell 11 percent each, while Tower Semiconductor Corp and NICE Corp traded down about 5 percent.
Ronen Menachem, chief market economist at Mizrahi Tefahot Bank, attributed the drop to both Friday’s sharp drop in the United States and “extreme security tensions” in Israel.
“We expect the market to remain very nervous,” he said.
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Investors are torn between two scenarios, Menahem said: First, the current escalation of tensions continues, damaging local economic activity and spilling over into international markets, and second, increased pressure on Israel from its allies leads to a solution that eventually leads to a ceasefire in Gaza.
In the latter case, he said, Israeli stocks could resume their upward trend and outperform international markets, with the TA-35 index hitting an all-time high just under a month ago.
Regional tensions have also impacted other Middle Eastern stock markets, including those in Egypt and Saudi Arabia, since the start of the new trading week.
