(News Bulletin 247) – Two major indices of the Israeli Stock Exchange lost more than 6% on Sunday following the terrorist attack against the Jewish state this weekend. The 10-year bond plunges.

The Hamas terrorist attack on Israel this weekend poses a new geopolitical risk for all equity markets.

But the first place most penalized obviously remains that of Tel Aviv. On Sunday two major indices on the Israeli Stock Exchange fell: the TA-35 lost 6.47%, its biggest fall in three years, according to Bloomberg, while the TA-125 fell 6.7%. The TA-Finance, which includes the securities of banks and insurers, dropped 8.25%.

Monday morning, these indices were still moving slightly downward.

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The bond market is not spared. According to data from investing.com, the yield on the Israeli 10-year bond jumped by almost 25 basis points (0.25%) on Sunday, a very significant movement in the bond market. In other words, the Israeli bond has fallen since the prices of debt securities move opposite to yields.

“This new round of violence is expected to be longer and more violent than the previous ones, thus clearly having a more negative impact on the economy and the budget,” Jonathan Katz of Leader Capital told Reuters.

Ori Greenfeld, chief strategist at Psagot Investment House, explains to Bloomberg that the war in Gaza will have a greater effect on Israeli markets than previous military operations. If the fighting spreads, the Israeli economy will likely be hit by a decline in private consumption and private and public investment.

Oil jumps

“If Israel has to make decisions that are not necessarily aligned with the international community, there could also be a decline in Israel’s international investments and trade relations with different countries,” Ori Greenfeld continued. “This could also affect the shekel (the national currency of the Jewish state), which we expect to see weaken.

This Monday morning the shekel plunged 1% against the euro to 0.2427 euros.

And in terms of impact for other markets, the contagion effect will unsurprisingly pass through oil prices. Gold, very sensitive to geopolitical risk, especially in the Middle East, is progressing strongly, with the December contract for a barrel of Brent from the North Sea advancing 3.37% to 87.43 dollars per barrel on Monday morning.

“For the markets, this increase in violence, with the rhetoric of support for the attack by the Iranian authorities, can only fuel fears about oil supplies, as has unfortunately been the case historically. It is too early to draw conclusions, but in the very short term, it is likely that a premium will be attached to the price of oil, causing it to rise again. Bad news for the world economy”, judges Sebastian Paris Horvitz of LBPAM.