Bloomberg: Israel’s assets are the worst performing globally in June economy

This June, Israeli assets turned into the worst global performance, after a long wave of rise fueled by investor bets that the US-Israeli war on Iran and the fronts associated with it would end with a permanent improvement in the security situation of the Israeli economy, but the progress of the US-Iran talks turned this reading upside down, according to Bloomberg.

The Tel Aviv 35 index fell by more than 12% in dollar terms this month, recording the largest loss among national stock indices, while the shekel fell by about 5% against the dollar since the beginning of June, also becoming among the worst performing currencies in the world during the same period.

Tel Aviv Stock Exchange data show that the Tel Aviv 35 Index declined by 6.91% since the beginning of the month in local currency until June 22, while the impact on the foreign investor doubled when taking into account the shekel’s losses against the dollar.

The losses come after significant gains that extended from November 2023 until the beginning of this month, as the Israeli stock market doubled several times, driven by expectations that Israel will emerge from the war with a stronger security situation and a more attractive technological economy.

War bet

Investors were looking at the long war as a costly phase, but it could end by weakening Israel’s direct opponents, from Gaza to Lebanon and Iran, raising growth opportunities in an economy worth about $640 billion. But the diplomatic shift between Washington and Tehran, according to Bloomberg, opened the door to the belief that Israel has begun to lose its gains politically as a result of the US-Iranian negotiations.

The research unit at the Israeli Bank Hapoalim said, in a note reported by Bloomberg, that the emerging agreement between America and Iran is seen locally as not improving Israel’s long-term security situation, and is even lower than the high expectations that were formed at the beginning of the military campaign against Iran.

This concern is related to the fact that Israel is not a direct party in the US-Iran talks, even though it participated in launching the war on Iran in late February, which left investors with an agreement taking shape without Tel Aviv, but it affects areas that Israel considers part of its direct security, especially Lebanon, according to the Israeli newspaper The Jerusalem Post.

Lebanon first

According to Axios, the Lebanese arena represents the most prominent node in the Washington-Tehran talks, as Iran insists on ending Israeli operations there, while Israel insists on maintaining what it calls “security zones” in southern Lebanon to confront Hezbollah.

Axios quoted two Israeli sources as saying that the Israeli government fears that the new understandings between America and Iran will legitimize Tehran’s influence in Lebanon and erode Israel’s freedom of military action there, after the proposed deconfliction mechanism now includes Washington, Tehran, Lebanon, and mediators, without Israel’s direct participation.

According to the newspaper, Israeli officials believe that the new formula may undermine previous understandings from 2024 that allowed Israel to act against Hezbollah threats, while the new mechanism focuses on preventing escalation and not on dismantling the party’s military structure in southern Lebanon, according to Axios.

Israeli anger

The emerging US-Iranian agreement sparked widespread controversy within Israel, as Israel Hayom newspaper said that the Israeli political establishment had “woke up” to an agreement being formed far from it, and quoted Minister Itamar Ben Gvir as saying that Israel was not bound by the Trump agreement, while opposition leader Yair Golan said that the deterrence achieved with the blood of soldiers had begun to dissipate.

The newspaper quoted the head of the Yashar Party, Gadi Eisenkot, as saying that the gap between the promises of “complete victory” and what is happening now cannot be wider, in a direct criticism of the Israeli government and the way it is managing the war and the path of the agreement.

Opinion polls show the extent of the internal crisis of confidence, as The Times of Israel published the results of a Channel 12 poll in which 71% of Israelis said that they do not trust that Trump will take into account Israel’s interests in the agreement with Iran, while 52% saw that Netanyahu’s performance harmed Israeli interests in the agreement.

Market gap

Bloomberg quoted the chief market economist at the Israeli Mizrahi-Tefahot Bank, Ronen Menachem, as saying that Israeli assets rose strongly over the past year, and therefore the recent developments may be an opportunity to make profits, adding that he sees the movement as tactical, not strategic, at the present time.

Chief Economist at IBI Investment House Rafael Gozlan said that what is happening is a “healthy process” that narrows the gap between the markets and Israel’s economic fundamentals, as the markets have begun to understand that the war with Iran has not ended permanently, and that its continuation will put pressure on the economy.

Israeli stock valuations fell to their lowest levels since January, based on the expected price-to-earnings ratio, and analysts also reduced profit estimates for Tel Aviv 35 index companies by about 4% over the past five weeks, indicating that the concern is no longer just political, but has begun to be reflected in profit expectations.

Bloomberg says that the index’s decline pushed it below its 100-day moving average for the first time since April 2025, a level that traders are monitoring as a technical signal of weak momentum after a long rise.

Relationship with Washington

The deterioration of the public relationship between Trump and Netanyahu increases the pressure on the markets, as Bloomberg quoted Piotr Mattis, a currency strategist at In Touch Capital Markets, as saying that the deterioration in the relationship between the US President and the Israeli Prime Minister may have contributed to pushing investors to take their profits from the shekel.

Axios quoted Israeli sources as saying that Netanyahu is currently more concerned about Lebanon’s part in the US-Iranian understandings than about the nuclear elements, and that he has sought help from his confidant Ron Dermer to try to influence Trump’s team regarding the Lebanon issue.