Israeli Markets Experience Decline Following Recent Violence

Israeli stock and bond prices faced a decline, and many businesses remained closed on Sunday in the aftermath of a violent attack by Hamas gunmen from Gaza. The attack resulted in the loss of hundreds of lives and the abduction of several individuals. As a result, key Tel Aviv share indices experienced a nearly 7% drop, with banking shares leading the decline at 9%. The government bond prices also fell by up to 3% in response to one of the bloodiest attacks Israel has witnessed in decades.

The initial market response to the attack has raised concerns about the economy and the fiscal budget. Jonathan Katz, Chief Economist at Leader Capital Markets, stated that this round of violence is expected to have a more prolonged and severe impact compared to previous incidents. He also predicted a sharp weakening of the shekel and a possibility of the Bank of Israel selling foreign exchange.

In addition to the economic repercussions, the conflict has also affected the aviation industry. Airlines such as Delta Air Lines, United Airlines, and Air India have suspended flights to and from Israel due to the rocket attacks launched by Gaza militants. However, rescue flights are being operated by Arkia and Israir to bring back Israelis who were on vacation.

The violence has also led to the cancellation of events and conferences. Nvidia, the world’s largest maker of chips, called off an AI summit scheduled for Tel Aviv, where CEO Jensen Huang was set to speak.

Despite the challenging circumstances, Israel’s Manufacturers’ Association assured that factories would continue operating to prevent any scarcity of essential products. Ron Tomer, President of the association, emphasized Israel’s production independence and reassured that residents would not face shortages.

While the economic damage caused by the conflict is yet to be fully assessed, the Bank of Israel referred to a 50-day war with Hamas militants in 2014, which resulted in damage amounting to 0.3% of the country’s gross domestic product.

Intel Corp, Israel’s largest employer and exporter, declined to comment on whether chip production was affected but stated that they were closely monitoring the situation and taking steps to support their workers. Tower Semiconductor confirmed that it was operating as usual.

As the situation continues to unfold, the Israeli government has directed ministry departments to provide the necessary budgets to manage the ongoing conflict. The central bank had previously projected 3% growth for 2023 and 2024.

In the face of adversity, Israel remains resilient, with companies striving to maintain operations and ensure the well-being of their workers. The nation’s production independence provides a sense of security, assuring the residents that essential goods will not be in short supply.