Economic Resilience Amid Conflict: Israel’s Stock Market and Growth

Overview of Israel’s Economic Landscape

Israel’s stock market has achieved unprecedented heights as it navigates the complexities of ongoing geopolitical tensions. Since the war commenced on October 7, 2023, the nation has engaged in multifaceted military operations, mobilizing an extensive number of troops typically involved in civilian roles. During this tumultuous period, Israel has simultaneously faced accusations of war crimes in international courts and significant internal protests. Yet, contrary to expectations, Israel’s economy appears to flourish, bolstered by considerable foreign investments and revitalized investor sentiment following a recent 12-day conflict with Iran.

Stock Market Recovery and Performance

After an alarming drop of up to 23% in October 2023, the Tel Aviv Stock Exchange (TASE) has demonstrated remarkable resilience. By early 2024, the stock market not only recovered but surpassed pre-war levels. As of mid-July 2025, the TASE has skyrocketed, reflecting an increase of over 200% since its lowest point in October 2023. This remarkable rebound showcases the confidence investors have in the resilience of the Israeli economy.

While the last quarter of 2023 reported an almost 20% contraction in GDP, largely due to reduced consumer spending and investment tied to the ongoing conflict, the overall economic growth for that year ended up at a modest 2%. Projections for 2024 indicate an additional growth rate of 1%, largely propelled by government expenditure. The OECD even forecasts a substantial 4.9% growth in economic activity for Israel by 2026.

Increase in Trading Activity

Recent reports indicate a surge in trading activity within Israel’s capital market. In 2024 alone, approximately 161,000 new trading accounts were established, a notable increase compared to the previous year. The first half of 2025 saw continued growth with 87,000 additional accounts created, many through investment firms.

Hadar Romano, head of data at TASE, noted that the previous year’s uncertainties faded, leading to increased public engagement in the capital markets. Investors took advantage of lower share prices, contributing to heightened trading volumes.

Factors Driving Investor Confidence

Avi Hasson, CEO of Startup Nation Central, identified multiple elements boosting global investors’ confidence in Israel. Despite the ongoing challenges, the perception of risk regarding Israel’s security and economy has improved. This is largely attributed to Israel’s successful military operations against adversarial forces, most notably Hezbollah in Lebanon, and a recent conflict with Iran, which has significantly diminished the latter’s hostile capabilities.

Hasson underscores the importance of viewing the fundamentals of Israel’s economy, showcasing its vibrant tech sector, entrepreneurial environment, and demographic growth. These factors draw global investors, encouraging a positive outlook for the Middle East’s economic future.

Technology Sector’s Role in Growth

A considerable part of Israel’s economic success can be traced back to its thriving technology sector. High-tech industries account for about 20% of Israel’s GDP and an impressive 56% of its exports. Government investments in research and development have played a significant role in enabling this success.

The recent conflicts have heightened interest in Israel’s defense sector from international markets. Notable participation at global defense exhibitions, including a strong Israeli presence at Abu Dhabi’s IDEX, underscores the rising profile of Israel’s defense technologies.

Foreign Investments Surge

Foreign investment has been pivotal to the momentum seen in Israel’s stock market and real estate sectors. In May 2025 alone, foreign investors purchased approximately 2.5 billion shekels, equivalent to around $743 million, in shares from TASE. Since the start of 2025, total foreign investments reached about 9.1 billion shekels, or around $2.7 billion.

The Israeli central bank reported a notable increase in liabilities to foreign investors, amounting to approximately $27.5 billion. This spike mainly resulted from rising prices of Israeli securities held by nonresidents and continued net investments from abroad.

Currency and Inflation Trends

The Israeli shekel experienced a noteworthy gain of nearly 7% against the U.S. dollar following the June conflict with Iran. Furthermore, S&P Global Market Intelligence projects that inflation will align with the central bank’s target rate by the third quarter of 2025, setting the stage for potential monetary easing.

Through adversity, Israel’s economy has illustrated resilience, with its stock market and technological sectors driving growth. The ongoing international interest demonstrates a renewed confidence in the stability and potential of Israel’s economic future.