Did The Tel Aviv Stock Exchange Plummet Amidst Gaza Conflict?
The expected damage to Israel's economy stemmed from two main factors. Firstly, the war in Gaza was anticipated to be prolonged, leading to heightened uncertainty and decreased consumer consumption
The Tel Aviv Stock Exchange (TASE) experienced a significant decline in share prices on October 8, 2023, as fears of extensive damage to Israel's economy loomed. The drop in prices was primarily due to the ongoing conflict in Gaza, which raised concerns about long-lasting implications for the country's economy.
The market reaction was swift, with major stock indices experiencing a significant downturn. The TA-35 stock index, consisting of blue-chip companies, plummeted by 6.4 percent, while the benchmark TA-125 index fell by 6.2 percent. Additionally, the TA-90 index, tracking shares with the highest capitalization not included in the TA-35 index, declined by over 6 percent. This downturn was echoed in the banking sector, with the TA-Bank index, representing the five largest banks, diving by 7.8 percent. Furthermore, construction, building, and insurance stocks witnessed a steep decline of 8 to 9 percent.
Economic Implications
The expected damage to Israel's economy stemmed from two main factors. Firstly, the war in Gaza was anticipated to be prolonged, leading to heightened uncertainty and decreased consumer consumption. Secondly, the technology sector slowdown caused by a downturn in the local high-tech industry, soaring rental prices, and overall economic uncertainty. These factors severely impacted the Tel Aviv real estate market, which suffered the hardest blow.
Sectoral Impact
Johan Chairil
Several sectors were severely affected by the drop in share prices resulting from the attack by Hamas, the terror group in the Gaza Strip. Among the hardest-hit sectors were:
- Real Estate
The Tel Aviv real estate market was hit the hardest due to the tech slowdown, which was driven by the downturn in the local high-tech sector, escalating rental prices, and concerns about the Israeli economy's trajectory. - Banks
The banking sector also experienced a significant downturn, with the TA-Bank index of the five largest banks diving by 7.8 percent. Financial institutions faced uncertainty and volatility amidst the ongoing conflict. - Construction and Building
Stocks related to construction, building, and insurance suffered a notable decline, ranging from 8 to 9 percent. The market reacted strongly to the potential disruption caused by the conflict. - Travel
The travel sector faced substantial challenges, becoming the weakest segment in the S&P 500. Global markets reacted to the conflict as airlines encountered service disruptions, while surging oil prices threatened travel profit margins.
Impact on Companies with Business Exposure to Israel
Companies with business exposure to Israel also experienced adverse effects on their operations and stock prices. Some notable examples include:
- Airlines
Several Asian, European, and US airlines have suspended direct flights to Tel Aviv. In light of the situation, US carrier Delta Air Lines canceled flights to Tel Aviv until the end of October to assess the region's developments. - Banks
International banks such as Goldman Sachs, JPMorgan Chase, and Bank of America have made adjustments to their operations in Tel Aviv. Goldman Sachs and JPMorgan Chase have asked their employees in the city to work from home, while Bank of America has closed its Tel Aviv office. - Energy
Israel's Ministry of Energy ordered Chevron, the second-largest oil and gas producer in the US, to shut down the Tamar natural gas field off the country's northern coast. This move has significant implications for Chevron's operations and revenue. - Technology
Indian software exporters with operations in Israel experienced a decline in their stock prices. Similarly, London-listed shares of BATM Advanced, an Israel-based technology firm, fell 7.3 percent. Despite reassurances from the company, investors remained concerned about the potential impact on trading. - Cruise Operators
Cruise operators, including Royal Caribbean, Carnival, and Norwegian Cruise Line, have modified their itineraries and redirected trips to Israel to mitigate the risks associated with the conflict.
Conclusion
The Tel Aviv Stock Exchange witnessed a substantial decline in share prices as the conflict between Israel and Hamas escalated. The negative impact was evident in various sectors, from real estate and banking to construction, travel, and companies with business exposure to Israel. As the conflict continues, the global market closely monitors the situation, awaiting further developments and their influence on the region's economy.