Israeli stocks and shekel fall after inconclusive election

Israeli stocks and the shekel fell on Wednesday, 28 October, after an inconclusive national election left the formation of the next government uncertain. Al-Monitor reported that the Tel Aviv Stock Exchange’s TA-125 index fell roughly 2.5%, while The National reported that the shekel lost about 2% against the dollar. The moves put investors’ attention on a coalition process that has yet to produce a government.

How far did Israeli markets fall?

Al-Monitor said the TA-125 plunged in early trading before recovering some losses later in the day. It put the blue-chip TA-35’s decline at about 1.8%. The National described a roughly 3% fall in the benchmark Tel Aviv stock index, which it said was on track for its biggest decline since June. The reports give different figures and do not establish a common measurement time or benchmark for that comparison.

The selloff was uneven. Al-Monitor reported that Bank Leumi shares lost roughly 4.6%, while defence contractor Elbit Systems recovered from an early plunge to close up 1.7% and Tower Semiconductor rose about 6%. The National reported falls of about 4% for Bank Hapoalim and more than 5% for Phoenix Financial.

Why the next coalition matters for the economy

Naser Mufrej, a finance and economics professor at Arab American University in Ramallah, told The National that a right-wing coalition led by Prime Minister Benjamin Netanyahu could increase economic uncertainty and weaken the shekel and growth. He said an opposition-led government supported by Arab parties could instead improve investor confidence. Those are scenarios dependent on who forms the government, rather than outcomes of the vote already known.

The National also cited an assessment by Capital Economics that the election was unlikely to have a major effect on Israel’s near-term growth or fiscal path but could matter over the medium term. Vijay Valecha, chief investment officer at Century Financial, called for a comprehensive economic plan, pointing to the deficit, defence spending and the cost of living as pressures facing the next government.

The International Monetary Fund’s July assessment projected growth of 3.5% in 2026 and 4.4% in 2027, according to The National. That forecast assumed regional ceasefires would largely hold. The IMF identified geopolitical uncertainty, elevated defence spending and labour supply constraints as continuing risks to the recovery.

Wednesday’s decline also came against a mixed longer-term market picture. Al-Monitor put the TA-125 down 1.78% over the previous month and nearly 6% over six months, but up roughly 7.5% for the year and more than 20% over the previous 12 months. The eventual coalition, and the policies it adopts, remained unresolved in the reports.