Tel Aviv shares drop with Israel on alert after strike on Houthi-controlled Yemen port
Major share indices fall as investors watch for reprisals in response to the Israeli airstrike following Friday’s deadly Houthi drone attack on Tel Aviv
Sharon Wrobel is a tech reporter for The Times of Israel.
Shares on the Tel Aviv Stock Exchange dropped on Sunday after Israel conducted a major strike against the Houthi-controlled port of Hodeida in western Yemen on Saturday, after a drone launched by the Iran-backed group killed a man in Tel Aviv.
The strike over the weekend marked the first time the Israel Defense Forces carried out a strike in Yemen.
The Tel Aviv Stock Exchange’s benchmark TA-125 index and the TA-35 index of blue-chip companies on Sunday both fell by almost 1 percent at the close in Tel Aviv after slumping as much as 2% over the course of the trading day. The TA-90 index, which tracks the shares with the highest capitalization not included in the TA-35 index was down 1.4%. The TA-Construction index declined 2.1% and the TA-Biomed index dropped 1.9%. On Friday, the shekel weakened 0.7% against the dollar trading at 3.66.
On Sunday, the Israeli Air Force was on high alert for reprisals in response to the airstrike on the Houthi-controlled port, which targeted fuel depots, energy-related sites, and other facilities. The strike was aimed at preventing the group from importing Iranian weapons, as well as causing the Iran-backed rebels financial damage.
Israel is more than nine months into a war with the Hamas terror group in Gaza, sparked by the group’s devastating October 7 onslaught on southern communities, in which close to 1,200 people were slain and 251 were kidnapped to Gaza, where 116 are believed to remain. In recent months, the Houthis, an Iranian proxy, have carried out strikes on vessels in the Red Sea in solidarity with the people of Gaza during the ongoing war.
“The drone that hit Tel Aviv and the attack by the IDF in Yemen poured cold water on the optimism in the markets for an agreement for the return of the hostages, which led to a slight depreciation of the shekel exchange rate and an increase in the country’s risk premium,” said economists at Bank Hapoalim. “The markets’ reaction is moderate in relation to the events, perhaps a kind of indifference developed in nine months of fighting.”
In the days before the drone attack, 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 was driving a rebound in local assets and tempered investor concern over a wider regional escalation.
The sentiment drove the TA-35 index to an all-time high of 2,076.77 points on July 15, the Tel Aviv bourse said. The TA-35 was trading 13% higher than on the eve of the outbreak of the Gaza war and is up about 10% so far this year, according to the TASE.
In the first three months of this year, the economy grew an annualized 14.1% after contracting 19.4% in the last quarter of 2023 as the war in Gaza took a heavy toll on consumer spending, trade, and investment. Overall, Israel’s economy expanded 2% in 2023, after growing at a fast pace of 6.5% in 2022.
Times of Israel staff contributed to this report.
