Shekel Declines Amid Rising Geopolitical Tensions
The Israeli shekel has faced significant pressure in recent trading sessions, falling by 1.5% against the dollar on Monday. This decline comes as investors express growing concern over the potential for an imminent attack on Israel by Iranian forces and Lebanese Hezbollah. The shekel's value reached 3.77 shekels to the dollar, down from 3.72 shekels at the end of the previous week. This volatility reflects a broader trend, as the currency has lost 5% of its value over the past year.
Increased Volatility Indicating Market Anxiety
Data from Phoenix indicates that implied volatility measures for the shekel have surged in recent days, with three-month indicators reaching approximately 11%, marking the highest levels since last November. Yoni Fanning, chief strategist at Tefahut Mizrahi Bank, noted that expectations surrounding Iran's potential military response continue to fuel market uncertainty. He stated, "We still have high expectations regarding the repercussions of the Iranian response, which also generates some volatility."
Geopolitical Threats Impacting Economic Stability
Analysts, including Piotr Mattis from In Touch Capital Markets, suggest that the shekel is struggling to maintain its recent gains amid escalating fears of a military confrontation. The Iranian Revolutionary Guard has issued threats to retaliate against Israel for the assassination of Hamas leader Ismail Haniyeh last year. Israeli Defense Minister Yoav Galant has reportedly informed U.S. Secretary of Defense Lloyd Austin that Iran is preparing for a large-scale military attack on Israel. This situation underscores the delicate balance between geopolitical tensions and economic stability in the region.
