Foreign investment rises in Israeli markets

Foreign investors returned to the Tel Aviv Stock Exchange in force last month, increasing their holdings despite ongoing conflict in Gaza and heightened regional tensions. Net foreign purchases reached an estimated NIS 2.5 billion ($700 million) in May, with much of the capital concentrated in the banking sector.

The renewed interest comes against the backdrop of continuing hostilities involving Hamas in Gaza and missile threats from Houthi forces in Yemen. Nonetheless, foreign acquisitions on the exchange have totaled roughly NIS 9.1 billion ($2.55 billion) since the start of 2025.

Approximately 70% of foreign investment in May went into banking stocks. 

The Tel Aviv Banks 5 Index surged nearly 10% during the month, reflecting investor confidence buoyed by robust quarterly earnings. 

Among the standout performers were Bank Hapoalim and Bank Leumi, which reported profits of NIS 2.7 billion and NIS 2.4 billion respectively for the first quarter. Other major banks, including Mizrahi-Tefahot and Israel Discount Bank, also posted strong results.

Defense-related equities continue to attract significant attention as well. Since January, foreign investors have acquired about NIS 5 billion ($1.4 billion) in defense industry shares, signaling expectations of sustained growth in the sector.

Overall market performance in May was solid, with major indices posting notable gains. The Tel Aviv 35 Index rose by 4.6%, while the broader TA-125 climbed 6%. Mid-cap and small-cap benchmarks also saw increases. In contrast, returns on money market funds capped at around 4%, highlighting the comparative appeal of equities.

Sector-specific indices showed strength, led by gains in banking, insurance (up 7.9%), and telecom and technology (up 6.9%). The market also saw new activity on the listings front, with vehicle leasing firm Eldan completing an IPO—one of several so far in 2025.

“Despite the ongoing military situation and sporadic missile fire, investor sentiment in May remained resilient,” said Ehud Nir, a senior analyst at the exchange. He noted that while a missile incident near Ben Gurion Airport briefly raised alarms, it had no lasting market impact.

Supportive quarterly earnings and favorable international developments, including new U.S. trade arrangements with major economies such as China, also contributed to market momentum, Nir added.