Israel's stock exchange during the war: how investors capitalized on the conflict with Iran

Instead of panic and collapse - growth. Oninvest analyst Konstantin Gnenny analyzed how stocks traded on the Tel Aviv Stock Exchange reacted to the escalation with Iran, and why some sectors soared, while others failed;

The conflict between Israel and Iran began to seriously escalate on June 13, 2025, when Israel attacked Iranian nuclear and military facilities. The parties formally agreed to a truce on June 23, as announced by President Trump. 

Surprisingly, the shares of the Tel Aviv Stock Exchange rose throughout the hot phase of the conflict. From June 15 to 23, they rose by 8%, with the maximum growth for the day - more than 7% - occurring on June 22. It was the first trading day (the exchange operates from Sunday to Thursday) after the US bombing of Iranian nuclear facilities;

And from the beginning of 2024 to its peak on June 22, 2025, the stock exchange's share price more than doubled, from 3 to 6.5 shekels per share.

The most intense growth came between May and mid-June 2025, a time when negotiations on the U.S.-Iran nuclear deal were already well underway and tensions were running high, followed by hostilities.

"The stock and currency markets ignored the start and progress of the war with Iran in June. But we see the same pattern in all global indices. Investors around the world realized pretty quickly that the operation will be short-term and it poses no threat to the Israeli economy," explains Valery Emelyanov, an analyst at Movcchan's Group, an investment management company. 

Alena Nikolaeva, portfolio manager at Astero Falcon, sees the stock exchange's growth not as a speculative bubble, but as a rational reassessment of strategic risks:

"The Iranian nuclear threat to Israel is a permanent risk backdrop that has persisted for decades. After the operation to destroy the nuclear infrastructure, the risk of long-term escalation has decreased, so investors have played that off," she explains. - If the main threat has subsided, assets should appreciate in value. This is confirmed by macro data: the shekel has strengthened, spreads on credit default swaps have narrowed (that is, the cost of default insurance has fallen), and the market expects a cut in the local key rate by August. All of this confirms that the Israeli stock market perceives what is happening as a removal of the threat."

According to her, by early July, the market had not only sustained growth but also hit all-time highs, outperforming all EMEA peers. The numbers are impressive: 62.2% dividend-adjusted growth for the TA-125 index since October 2023 versus 48.8% for the S&P 500. 

"That is, Israel, given the war, has handled the difficulties better than the world's largest market," Nikolaeva emphasizes.

According to her, the press is now actively talking about the "peace dividend," i.e., the economic and financial benefits that a country or region receives in the event of de-escalation of a conflict or transition from war to peace. This is a tectonic shift in investors' perception, says Nikolaeva: "So the logic is no longer 'war = sale', but 'strategic initiative = risk reduction'. This is probably what maturity is all about.

Analysis of the Tel Aviv Stock Exchange sectoral indices shows that the growth has been extremely uneven. If we look at the dynamics since the beginning of March 2025, when nuclear negotiations between the US and Iran began, the picture becomes even more vivid.

The leaders of growth during the period of military operations (we decided to take a slightly wider time horizon from June 10 to June 26 to show the market dynamics during active hostilities compared to the "peaceful" period) were the sectors of construction (plus 23%), insurance (plus 22%), real estate (plus 17%). At the same time, the outsiders were oil and gas (plus 4.5%) and biomedical (plus 2.3%).

To understand whether the military action really affected the sectoral distribution, we analyzed the dynamics of the same industries in the year preceding the conflict (from June 30, 2024 to June 9, 2025).

It turned out that the insurance industry was already among the growth leaders, showing growth of over 130% for the year. The biomedical sector, on the contrary, demonstrated weak results before the war.

"There is no direct connection with the war, and one cannot assume that someone planned to make money on reconstruction after the bombings," Yemelyanov believes. - Investors, primarily long-term investors, continued to buy securities that they consider the most promising".

To highlight the real impact of the hostilities, we calculated the change in the position of different sectors in the growth ranking. For example, the construction sector was the ninth most profitable sector before the hostilities, but during the hot phase of the conflict it became the leader.

- As already noted, the construction industry has made an incredible leap from 9th place in the growth ranking to first place, rising eight positions at once. This is the clearest example of how the war changed investment priorities.

"This is quite a rational bet on the future," explains Nikolaeva. - Military actions have made us reevaluate the meaning of living quarters. If there are no protective rooms and sustainable infrastructure, it is illiquid. Therefore, the market has started to lay down a new standard of construction with seismic protection, shelters, etc."

In her opinion, this is the beginning of a new investment cycle: "This is such a serious trend for urban renewal. And this can pull the economy (upward) for several years.

- IT and telecommunications companies rose four positions. The explanation is simple: demand for communications systems, cybersecurity, and military technology has increased dramatically in the face of active warfare.

- The energy sector climbed two positions. 

"If conventional generation is under threat, alternatives are needed. That is why there is a bet on Cleantech (here are companies in the field of alternative energy - editor's note) with an emphasis on greater physical security. Investors are choosing an option where there are fewer risks of failure under current conditions," says Nikolaeva.

- The companies oil oil sector - it lost as many as 10 positions, becoming the Tel Aviv Stock Exchange's worst sector during the war.

"There is a clear influence of military events here," Yemelyanov said. - Iran managed to hit the station that powered the Haifa refinery. The refinery has not fully restored operations until now. The Bazan Group's (it operates this refinery) shares have been losing almost 10% cumulatively since the start of the operation."

Nikolaeva sees this as a deeper structural change: according to her, the oil and gas industry has had serious structural problems in recent years: outdated infrastructure, risks with pipes and exports, hubs - all of this was due to instability in the region;

- The banking sector lost three positions, but remained among the growth leaders. It accounts for almost a third of the TA-35, Israel's leading stock index, which includes the 35 largest public companies traded on the local exchange. The growth of the banking and finance sector has become a kind of signal of confidence in the system, says Nikolaeva: "Stable profits, a strong shekel, low inflation and stable margins are contributing to this," she says;

The Israeli stock exchange has shown surprising resilience to the military conflict, moreover - many sectors have shown strong growth. This shows both the maturity of the Israeli stock market and the fact that investors see short-term military action not as a source of panic, but as an elimination of long-term risks.

This article was AI-translated and verified by a human editor