Despite war shekel strengthening sharply

Despite the war the shekel is strengthening sharply in forex trading. This afternoon the Bank of Israel set the shekel-dollar rate down 1.75% at NIS 3.537/$ and the shekel-euro rate was set 1.418% lower at NIS 4.094/€.

In late afternoon futures the shekel-dollar rate was down a further 1.13% at NIS 3.513 and the shekel-euro rate was down 1.3% at NIS 4.668/€.

Tuval Investment House CEO Ori Tuval said, “It was possible to see yesterday, contrary to the expectations of most of the public and commentators who feared sharp declines in the stock market that the market actually responded with rises. Investors understand that what is happening with Iran is no longer a round of fighting, but a strategic change – a game changer. This is an action aimed at ‘decapitating the head of the snake’, which is expected to bring about a dramatic result: a profound and long-term change in the balance of threats to Israel.”

“Although this is a process involving economic challenges in the short term, the long-term result may be a new Middle East – even more substantial than a peace agreement with Saudi Arabia. At the end of the campaign, which we hope will last about two to three weeks, Israel may find itself in a new security reality, free from a real existential threat and free from terrorism.”

“The economic significance of such a scenario is dramatic: strengthening the local economy and opening the door to a long period of prosperity and growth – possibly even for the next twenty or thirty years. Now is the time to start preparing for a new golden age for Israel – and I recommend that investors seriously consider increasing their exposure to Israeli securities.”

Mizrahi Tefahot Bank chief economist Ronen Menachem thinks that the strengthening of the shekel is impressive because it is appreciating against both the dollar and the euro by the same amount. “It is also impressive in light of the May Consumer Price Index, which was lower than expected and in itself may bring an interest rate cut closer.”

“However, in my opinion, this is the result of the higher-than-usual volatility that has characterized the Israeli currency in recent days. As evidence, calculating a week back, this is still a 2% depreciation in the shekel exchange rate against the dollar. Over time, excluding fluctuations in either direction, the shekel is similar to its level a month ago.”

“Part of the shekel’s recovery this morning is related to futures on US stock markets, which are recovering slightly this morning, but most of the story is local. Another factor may be related to the favorable impression of non-residents on the impressive performance of the stock market in Israel yesterday, even though it was the first time there was trading since the outbreak of the war.”

“I estimate that the fluctuations against the dollar (at least) will continue even in the run-up to the US Fed’s interest rate announcement the day after tomorrow (Wednesday). In conclusion, the geopolitical environment is creating a more intensive than usual atmosphere and it will continue to be expressed in the shekel exchange rate from time to time. No trend can be concluded from this. Over time, the economy has good fundamentals that will support the shekel.”

Published by Globes, Israel business news – en.globes.co.il – on June 16, 2025.