Tel Aviv shares dive as deadly Hezbollah rocket strike stokes fear of regional war
Major share indices drop as investors weigh threat of a wider escalation; gas stocks suffer losses after Hezbollah drone believed to be targeted at Karish gas site was shot down
Sharon Wrobel is a tech reporter for The Times of Israel
Shares on the Tel Aviv Stock Exchange plunged on Sunday after the previous day’s deadly rocket attack by the Hezbollah terror group on the northern Druze town of Majdal Shams killed 12 children, sparking investor fears over a wider war.
The Tel Aviv Stock Exchange’s benchmark TA-125 index fell 2.3 percent and the TA-35 index of blue-chip companies was down 2.4% at the close of trading in Tel Aviv. The TA-90 index, which tracks the shares with the highest capitalization not included in the TA-35 index, plunged almost 3%, and the TA-Construction index dived almost 5%.
“The sharp declines in the local market reflect investors’ fears of a wider escalation on the northern front following the deadly strike,” IBI investment house chief economist Rafi Gozlan told The Times of Israel. “As there is expectation of a harsh Israeli military response to the attack, much of the uncertainty is around whether the response to the response will lead to an all-out war with Lebanon, which is pushing Israel’s risk premium up.”
“Although both sides appear not to want a war on the northern front, in reality one action could lead to another and spiral the already tense situation with the Lebanese terror group out of control,” Gozlan added.
On Saturday afternoon, 12 children and teens were killed when a rocket fired from Lebanon by Hezbollah hit a soccer field in the northern Druze town. It marked the single deadliest attack by Hezbollah on northern Israel since fighting there began the day after the October 7 onslaught by the Hamas terror group on southern Israel.
Israeli politicians and senior officials called for a swift and harsh response against Hezbollah, and Prime Minister Benjamin Netanyahu hurried home from the US after the IDF said that the deadly projectile was an Iranian-made Falaq-1 with a warhead of over 50 kilograms (110 pounds) of explosives. Iran-backed Hezbollah has denied responsibility for the deadly attack.
A Biden administration official expressed concern that the Hezbollah strike could spark an all-out war between Israel and the Lebanese terror group.
Israel is almost 10 months into a war with the Hamas in Gaza, sparked by the group’s devastating October 7 attack, in which close to 1,200 people were slain and hundreds were kidnapped to Gaza, where many remain. Since October 8, Hezbollah-led forces have attacked Israeli communities and military posts along the border on a near-daily basis, with the group saying it is doing so to support Gaza amid the war.
Gozlan noted that the escalation in the north occurred after a drop in the country’s risk premiums in recent weeks amid cautious optimism that Israel was progressing on talks to reach a ceasefire agreement with Hamas and a potential deal for the release of the hostages held by the terror group, which was driving a rebound in local assets and tempered investor concern over a wider regional conflict.
The sentiment drove the TA-35 index up more than 4% this month and about 10% so far this year, according to data by the TASE. The TA-125 is up more than 5% so far this month.
Meanwhile, the TA-Oil and Gas Index on Sunday dropped 3.2% after a Hezbollah drone launched from Lebanon believed to be heading toward offshore gas infrastructure in northern Israel was shot down over Israel’s territorial waters on Saturday morning. One of the Navy’s Sa’ar 6-class corvettes intercepted the drone at a significant distance from the Karish gas field off Israel’s Mediterranean coast.
Karish, owned by London-headquartered explorer Energean, is Israel’s third offshore field. Its natural gas started to flow in October 2022 after the Leviathan natural gas field, the nation’s largest, started pumping in December 2019, and the nearby Tamar well — which holds some 10 trillion cubic feet (tcf) of natural gas, half of the amount held in Leviathan — began in 2013.
“Critical infrastracture, including gas rigs, are a target of Hezbollah, which is a risk factor that the economy has been aware of in recent months,” said Gozlan. “The flare-up in the north is only adding to concerns that gas fields could be shut down.”
In the first days of the outbreak of the war in Gaza, the Tamar offshore natural gas field was temporarily shut down.
Times of Israel staff contributed to this report.
