Israeli Stocks Plunge Over 12% This Month as Peace Talks Trigger War Premium Unwind
N.R. Finch
U.S.–Iran ceasefire talks are forcing a repricing of Israeli assets: the TA-35 is down over 12% in dollar terms this month while the shekel has shed about 5% — both the worst globally. This means → the three-year bet that war would buy security is being unwound.
How big is the sell-off in global context?
The TA-35 benchmark fell more than 12% in dollar terms this month — its steepest drop since the October 2023 Hamas attack and the worst among major global indices.
The shekel slid about 5% against the dollar, topping the global currency-loss table; it last traded at 2.9683 as of 10:30 London time.
In plain terms = stocks and currency both ranking dead last globally signals this is not a sector problem — it is an across-the-board exit from "Israel" as an asset class.
How much had they risen before this reversal?
From November 2023 to early this month, the shekel gained 42% against the dollar — the best-performing currency in the world over that span.
The TA-35 nearly quadrupled in the same period, trailing only Ghana among global equity markets.
This means → investors had been pricing in a thesis that military action would improve security and unlock growth in Israel's $640 billion, tech-heavy economy. That thesis is now being repriced in reverse.
Why are peace talks bearish, not bullish?
Bank Hapoalim told investors the emerging U.S.–Iran deal is seen locally as failing to improve Israel's long-term security posture — falling well short of the high expectations set when military operations against Iran began.
Israel is not a party to the U.S.–Iran talks, yet its ongoing operations in Lebanon have repeatedly caused Iran to suspend negotiations — a key friction point between Netanyahu and Trump.
In plain terms = the market is not afraid of war; it is afraid of "talks that go nowhere." Peace expectations have not materialized, but the war premium is already draining away.
How much does the Trump–Netanyahu rift matter?
Piotr Matys, currency strategist at In Touch Capital Markets, said the public deterioration of the two leaders' relationship has prompted some investors to close long-shekel positions.
He warned that a break below the 2.9800 level could signal further weakness.
This reflects the fact that part of the rally was built on an assumption of rock-solid U.S.–Israel ties. Once that assumption wobbles, capital leaves first.
What do technicals and valuations show?
The TA-35 has broken below its 100-day moving average — a gauge of medium-term trend — for the first time since April 2025.
Its price-to-earnings ratio has dropped to the lowest since January; over the past five weeks, analysts have cut earnings-per-share forecasts for index constituents by roughly 4%.
This means → it is not just sentiment falling — earnings expectations are being marked down in tandem. When both move together, a floor is typically harder to call.
Analysts are split — tactical dip or structural reversal?
Ronen Menachem, chief market economist at Mizrahi-Tefahot Bank, called the decline "tactical, not strategic" — after a year of outsized gains, recent events simply gave some investors a reason to take profit.
Rafael Gozlan, chief economist at IBI Investment House, disagrees: "The market is digesting a reality — the war with Iran and its proxies has not ended permanently, and that will weigh on the economy."
Put simply = one side says "just a pullback," the other says "the thesis has changed." Which is right depends on whether the next phase of U.S.–Iran talks produces a deal that materially improves Israel's security environment.
Content is for reference only, not financial advice.