The Tel Aviv Stock Exchange’s Crazy Week: One-Year Returns in Three Days
The Tel Aviv Stock Exchange (TASE) delivered a performance few could have predicted at the start of the week. A sharp rally, sparked by geopolitical developments and hopeful signals about post-war economic policy, produced what looked like a year’s worth of gains in just three trading days. Investors watched the TA-35, TA-125, and TA-90 surge on the back of a broader risk-on mood, even as some warned against overexposure in a volatile environment.
Three Days, Three Indices: The Numbers
In the shortened week, the main benchmarks posted impressive numbers: TA-35 rose about 5.4% over the three sessions; TA-125 gained 5.9%; and TA-90 jumped by around 7.3%. The pace of gains was particularly notable on Sunday and Tuesday, with modest pullbacks on Monday before another leg higher. By week’s end, the market had climbed to new intraday highs—the TA-35 marking its 39th high of the year and the TA-125 its 36th—signaling a renewed appetite for domestic equities.
Sector Leaders: Real Estate, Construction, and More
The rally was not evenly distributed. Sector leadership skewed toward real estate and construction, with real estate stocks surging more than 10% for the week and the real estate construction index (the TA construction segment) up over 12%. Insurance stocks also enjoyed a strong run, lifting around 12.6%, while the banking index jumped roughly 7.7% and the oil and gas sector climbed about 6%. The standout performers were construction and property-related companies, which had lagged the broader market for much of the year and were seen by many traders as the most sensitive to a potential end to the current geopolitical stretch.
Why the Surge? Geopolitics, Rates, and a New Narrative
Analysts point to a confluence of factors. The rally built on news that was interpreted as a path toward stabilizing the regional situation, along with favorable macro signals in the local economy. A major talking point has been the potential for rate relief after the conflict subsides. The Bank of Israel’s decision to hold the policy rate at 4.5% recently has not dampened sentiment; instead, traders expect eventually lower rates once risk premia ease and global monetary policy normalizes.
Investor commentary underscored that the move reflected a local rebound in confidence rather than a blanket endorsement of risk. A prevailing view is that a peace-driven rebound could unlock a wave of activity—construction resuming, workers returning to sites, and renewed demand for housing—as well as potential upside from foreign buyers and renewed investment in the domestic market.
What Investors Are Saying: Caution Remains in the Mix
Yaniv Pagot, the exchange’s Deputy CEO, emphasized that while the market is enjoying a sharp ascent, caution remains warranted. “The gains are real and locally driven, but the situation on the ground remains fragile,” he noted. He also highlighted that the government debt and longer-term credit conditions will shape the sustainability of the rally, especially if external shocks reappear or if risk appetite shifts abroad.
A Path Forward: Can Real Estate and Construction Close the Gap?
A persistent question is whether real estate and construction stocks can close the remaining gap versus other booming sectors. Real estate has lagged the most over the past year, making this a critical test case for the broader market’s recovery narrative. If the war’s end translates into higher employment, renewed infrastructure activity, and a modest decline in long-term interest rates, these stocks could continue to outperform and help bring the broader market to new highs.
What to Watch Next
In the near term, investors will be watching central-bank signals, especially how the Bank of Israel’s policy trajectory interacts with domestic demand and foreign capital flows. The currency move, a stronger shekel, also matters for returns on foreign-denominated holdings and for companies with large import components. Finally, any geopolitical developments will cut both ways—potential boons if stability prevails, or volatility if new headlines emerge.
