Israel’s stock markets are surging even as Middle East conflicts intensify, highlighting the nation’s economic resilience.
The Tel Aviv 35 index has climbed 20 per cent year-to-date, building on last year’s 51.6 per cent rally and gaining 1 per cent during the recent two-month war with Iran. The broader Tel Aviv 125 is up more than 17 per cent in 2026, surpassing major Wall Street benchmarks. The shekel has strengthened nearly 7 per cent against the U.S. dollar, adding 4 per cent amid the fighting despite global demand for safe-haven assets.
Karen Schwok, CEO of Tel Aviv-based Lucid Investments, describes this as a shift from shock to normalisation. “Markets have not only be resilient, but they’ve been remarkably strong,” she told CNBC. Foreign capital is returning, focusing on technology, finance, and defence sectors, signalling renewed investor confidence.
This buoyancy reflects wider strengths despite nearly three years of war footing since Hamas’s 7 October 2023 attack, which sparked Gaza operations, strikes on Iran alongside the U.S., clashes with Hezbollah in Lebanon, and Houthi assaults from Yemen.
The Bank of Israel recently cut its 2026 growth forecast to 3.8 per cent due to hostilities, yet Governor Amir Yaron sees potential for 5.5 per cent in 2027 if tensions ease. IMF projections show 3.5 per cent growth this year, outpacing the U.S. (2.3 per cent) and EU (1.3 per cent), with debt-to-GDP at a low 69.8 per cent versus the G7 average of 123.7 per cent. Unemployment stands at 3.2 per cent, inflation at 1.9 per cent within target.
Tech deals like Google’s $32 billion Wiz purchase and Palo Alto Networks’ $25 billion CyberArk acquisition, plus booming defence exports and gas revenues, drive momentum.
“High-tech goods and service exports have been the main factor behind the past two decades of strong growth and wealth creation but the economy has grown strongly in other areas, including developing gas resources and defense exports,” said Keren Uziyel of the Economist Intelligence Unit.
However, Wharton professor Joao Gomes warns of labour shortages, weak tourism, and spending caution. “Absent a successful peace arrangement, the outlook is more challenging,” he cautioned.
As Trump extends ceasefire talks, fragility lingers, but Israel’s adaptability shines through.