Almost 60 per cent of betters are backing former military commander Gadi Eisenkot to become the next Israeli prime minister in Tuesday’s election, data from prediction market Polymarket shows, compared to 27 per cent for Prime Minister Benjamin Netanyahu.
asserted
data → back → Netanyahu
Israel’s financial markets have made significant gains despite three years of war and domestic political turmoil.
asserted
markets → make → war
Yet some investors expect extra progress if the opposition defeats Netanyahu, potentially easing regional friction and political risk.
asserted
opposition → expect → friction
Meanwhile, opinion polls suggest a close contest, with neither Netanyahu’s ruling Likud party nor Eisenkot expected to secure the 61 seats needed for a majority in the 120-seat Knesset.
asserted
party → suggest → Knesset
That points to the likelihood of prolonged coalition negotiations or another election, coming at a moment when the global artificial intelligence surge underpinning local markets has begun to falter.
asserted
surge → point → markets
Since the October 7 Hamas attacks in 2023, the Tel Aviv stock exchange has surged 130 per cent, comfortably beating Wall Street’s 80 per cent advance, while the shekel has risen 25 per cent in one of the strongest currency performances worldwide.
asserted
shekel → surge → performances
Financial analysts attribute much of this growth to Israel’s tech sector and defence spending, which has nearly doubled to roughly 8 per cent of GDP.
asserted
which → attribute → GDP
As both Netanyahu and Eisenkot pledge to maintain military pressure on Iran and Hamas, markets are weighing their broader policy divides.
asserted
markets → pledge → divides
JPMorgan forecasts the shekel could fluctuate by as much as 3 per cent depending on the final result.
uncertain
shekel → forecast → result
An opposition victory that improves relations with Western allies and halts a judicial overhaul that sparked mass protests in 2023 could strengthen the currency, JPMorgan said, while another Netanyahu-led government could weaken it.
uncertain
government → improve → it
Billionaire investor Bill Ackman, while stopping short of backing a candidate, said a government without far-right ministers Itamar Ben-Gvir and Bezalel Smotrich would signal that Israel was "turning a new page," potentially helping rebuild its international credibility and expand the Abraham Accords with its neighbours.
asserted
Israel → stop → neighbours
IBI Investment House also expects an opposition victory to lift the markets.
asserted
victory → expect → markets
"From a capital markets perspective, this would likely be reflected in a decline in Israel's risk premium, appreciation pressure on the shekel, and a positive reaction in the local market," IBI's Chief Economist Rafi Gozlan said.
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Gozlan → reflect → market
"The most significant issue is what the result will mean for the region," said Equity Bank's chief economic adviser Charlie Robertson.
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adviser → mean → region
"If Netanyahu is reelected it might increase the chances of further escalation with Iran, whereas a defeat might be seen as lessening the tensions.
uncertain
defeat → reelect → tensions
But the prospect of gains under an opposition government does not mean investors expect Israeli assets to suffer if Netanyahu remains in power.
asserted
Netanyahu → mean → power
Stocks and bonds have proved remarkably resilient through years of war and political upheaval, and some investors remain confident in the economy regardless of the election outcome.
asserted
investors → prove → outcome
Union Investment's Sergey Dergachev has been buying Israeli bonds ahead of the election, betting the economy and companies he favours will remain fundamentally strong.
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he → buy → election
"We are very constructive on Israeli credits going into the election," Dergachev said, adding that bonds were less prone to major swings and the region's intertwined conflicts should eventually ease.
asserted
conflicts → go → swings
Risks remain
Tel Aviv shares were up around 1 per cent in the final session ahead of Tuesday's vote, taking their year-to-date gain to about 12 per cent.
asserted
shares → remain → cent
However, both they and the shekel have pulled back some 10 per cent since May.
uncertain
they → pull → May
Analysts again point to the strong link to tech given global AI indexes have also been dropping, although there has been one nagging issue throughout the last three years.
asserted
indexes → point → years
Despite the sharp stock market rally, Copley Fund Research data show that foreign investors have actually been edging away.
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investors → show → rally
The share of global funds holding Israeli equities is at now at record low 19 per cent, down from 34 per cent in 2023.
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share → hold → 2023
TS Lombard's Christopher Granville cited central bank estimates that the war had cost the economy more than $55 billion by last year, equivalent to 8.6 per cent in cumulative lost GDP growth.
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war → cite → growth
Public debt has risen to nearly 70 per cent of GDP, around 10 percentage points higher than in 2022, while the budget deficit is expected to remain around 4.5 per cent of GDP, versus less than 2 per cent before the conflict.
asserted
deficit → rise → conflict
Central bank head Amir Yaron stressed last week the need to "preserve adequate fiscal policy space" given the Iran war.
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Yaron → stress → war
Like stocks, Israeli government bonds have rallied, returning about 30 per cent over the last two years, more than double the main emerging market indexes.
asserted
bonds → rally → years
The main risk for investors is an inconclusive result that prolongs political uncertainty, delaying budgets, reforms and investment, some investors believe.
asserted
investors → prolong → budgets
That uncertainty can produce sharp short-term swings.
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uncertainty → produce → swings
Tel Aviv Stock Exchange research covering the last 10 elections found volatility in leading share indexes rose by as much as 45 per cent in the weeks after voting compared with a typical week.
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volatility → cover → week
But initial losses were typically recovered within a month, with the indexes posting an average gain of about 1.7 per cent.
asserted
indexes → recover → cent
Over a longer horizon, the TA-125 returned an average 16.4 per cent in the year following elections, compared with a long-term annual average of 11.5 per cent, the research found.
asserted
research → return → cent
Political deadlock often weighed on stocks before voting, but the effects typically faded within months, said Nissan Avraham, an analyst at the Tel Aviv Stock Exchange's research unit.
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Avraham → weigh → unit
That record supports the view that elections matter less for Israeli companies than many investors assume.
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investors → support → companies
Lior Yochpaz, chief investment officer at insurance company Menora Mivtachim, said businesses have continued to thrive despite years of political upheaval, judicial overhaul proposals and regional conflict, helped by a relatively business-friendly environment.
asserted
businesses → say → environment
For some investors, however, the more attractive election trade lies outside Israel.
asserted
trade → lie → Israel
TT International's Jean-Charles Sambor said an opposition victory or weakened Netanyahu government could ease regional tensions and benefit Lebanese bonds.
uncertain
victory → say → bonds
"The best way to play it for us is through other Middle East countries, and for us Lebanon is a good proxy," Sambor said.
asserted
Sambor → play → us
The Aporia
