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Israel's TA-125 at new peak even as tensions flare with US strikes on Iran
Israel's TA-125 rose 2.2 per cent on Sunday to a fresh high of 2,931.9, just after the US struck three nuclear sites in Iran. Since the beginning of the latest attacks on June 13, the index has risen nearly 7.5 per cent, while the MSCI Asia ex Japan has fallen by 0.63 per cent.
In the year so far, the TA-125 index has risen 18.9 per cent, while the MSCI Asia ex Japan and MSCI World indices are up 11.2 per cent and 4.83 per cent, respectively.
Over the weekend, the US struck three nuclear sites in Iran with bunker-busting bombs, ending speculation of its involvement in the ongoing conflict in the region. US President Donald Trump declared the three facilities 'totally obliterated,' and warned of greater attacks unless Iran makes peace with Israel.
Following the strikes, Iran vowed to retaliate, warning the US of "dire consequences" and has reportedly approved the closure of the Strait of Hormuz. Asked about the Strait, Iran's Foreign Minister Seyed Abbas Aragchi said that 'a variety of options" are available to Iran, adding that the country would defend itself by all means necessary.
Why is Israeli stock market surging?
The market is rising as investors and global markets bet on a contained conflict and limited escalation following the US strikes on Iran, according to analysts.
There was initial concern that oil prices would spike and Asian markets would open sharply lower. However, that didn't happen, according to G Chokkalingam, founder and chief investment officer at Equinomics Research. He believes this indicates that both the equity and oil markets expect the situation to de-escalate, possibly leading to negotiations rather than a broader conflict.
Regarding the Israeli market, its total market capitalisation is only around $429 billion, with equities accounting for $216 billion, Chokkalingam said. "This means even small domestic or foreign inflows can significantly impact the index."
Additionally, confidence may stem from the US backing of Israel, which reassures investors that the economic impact will be limited, Chokkalingam said. "Unlike during the Ukraine war, when oil jumped nearly 30 per cent, the Israel-Iran conflict has caused only an 11 per cent rise in oil prices, reinforcing the belief that the war may remain localised and short-lived."
Further, it is a preconceived notion that geopolitical tensions may lead to stock market corrections, analysts had noted earlier. "In fact, heightened geopolitical tensions can lead to more fiscal and monetary easing, and the market loves loose policies," according to Jitendra Gohil, chief investment strategist at Kotak Alternate Asset Managers.
Back home, stock markets fell over 1 per cent in early trade, tracking cues from their Asian peers. As of 12:40 PM, the BSE Sensex index was at 81,828.57, lower by 575.47 points or 0.70 per cent, while the Nifty50 was at 24,942.95, down 169.45 points or 0.67 per cent.
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