Shares on Tel Aviv Stock Exchange plummet during growing internal divisions

Shares on the Tel Aviv Stock Exchange plunge, in light of rising internal tensions and growing investor fears that Israel could face a looming constitutional crisis.

The Tel Aviv Stock Exchange’s benchmark TA-125 index drops 3.2%. The TA-35 index of blue-chip companies is down 2.9%. The TA-90 index, which tracks the shares with the highest capitalization not included in the TA-35 index, falls 4.2%, and the TA-Insurance and Financial Services index dives 6.7%.

Protesters gather in Jerusalem for the sixth consecutive day of demonstrations against the government’s plans to dismiss Shin Bet chief Ronen Bar and Attorney General Gali Baharav-Miara.

“The internal conflict in Israel is already impacting the financial markets,” warns Meitav Investment House chief economist Alex Zabezhinsky. “A return to fighting and an escalation of the internal conflict could harm economic growth, lead to a higher deficit, increase the risk of a downgrade of Israel’s credit rating, and delay interest rate cuts.”

The shekel depreciated about 1% on Friday, trading at around NIS 3.71 per dollar, the weakest level since the end of November, during protests from business leaders and the country’s largest labor union against the plans to oust Bar and Baharav-Miara.

“Rising internal tensions in Israel (led by the planned dismissal of the Shin Bet chief, the government’s intention to dismiss the Attorney General, and the fear of a constitutional crisis) coupled with heightened geopolitical tensions drove a significant depreciation of the shekel exchange rate and a rise in bond yields,” says Bank Hapoalim chief strategist Modi Shafrir.