Israeli stocks soar on anticipation US strikes will calm Iran crisis
Israel’s equity stocks have experienced an uptick, fueled by optimism that US military actions could mitigate tensions with Iran. On Sunday, Middle Eastern stocks experienced an uptick, primarily driven by gains in Israel and Egypt, as traders in the region speculated that the US strikes on Iran could hasten the resolution of the ongoing conflict between Iran and Israel. Israel’s TA-35 benchmark index increased by 1.5 per cent, marking its sixth consecutive day of gains and remaining on track for the largest quarterly advance since 2003. Egypt’s equity benchmark recorded a notable increase of 2.7 per cent. Other markets in the region experienced slight increases. The Boursa Kuwait Premier Market Index and the MSX30 Index in Muscat both experienced an increase of 0.4 per cent. Qatar’s benchmark increased by 0.2 per cent. Saudi Arabia’s Tadawul All Share Index experienced a decline of 0.3 per cent.
“Markets are focused on whether the war spreads to other countries and there is no evidence of that as yet,” said Hasnain Malik, a strategist at Tellimer in Dubai. “The benign interpretation is that the US intervention will accelerate the end of the war.” That, of course, remains to be seen. In Israel, bank shares constituted the majority of the gains, whereas defense supplier Elbit Systems Inc. experienced a decline of over 2 percent. “The market is displaying cautious optimism against the backdrop of the security reality,” noted Yaniv Pagot, vice president of trading at Tel Aviv Stock Exchange, in a recent communication. “The increases reflect an enhancement in the risk premium associated with the State of Israel.”
Regardless of the initial response in the Middle East, global investors are preparing for potential market volatility that could lead to a rush into safe-haven assets on Monday. Money managers are currently monitoring Iran’s possible reactions, particularly regarding its potential efforts to obstruct the Strait of Hormuz — a crucial route for oil and gas — and whether it will target US assets in the area. “In the short term, markets like crude oil will hinge on Iran’s response—whether it escalates the conflict in a manner that affects oil supply or chooses to de-escalate by making concessions regarding its nuclear program,” stated Malik from Tellimer. “The biggest risk to the region is a collapse of the regime in Iran and a descent into Syrian-style civil war.” The likelihood of this may rise with US intervention.
