Israeli markets rally on renewed peace optimism

Tel Aviv stocks surged to record highs on Sunday, fueled by renewed optimism around U.S. President Donald Trump’s proposal to end the war in Gaza and secure the return of the remaining Israeli hostages.

It was the first trading day since last Tuesday, and both the blue-chip TA-35 index and the broader TA-125 opened more than 2% higher, maintaining strong momentum throughout the session. 

By late morning, the TA-35 was up 1.4%, while the TA-125 rose 1.6%, signaling investor confidence in both political developments and underlying market fundamentals.

The Israeli shekel also rallied, gaining 0.7% against the U.S. dollar on Friday, reaching a three-year high — another signal that investor sentiment is shifting toward risk-on mode.

In a detailed weekend market note, Sandrine Zimra, senior market analyst at Mena Today, highlighted that the rally is not just driven by headlines, but by underlying economic strength that has built steadily over the past year.

“Markets are responding to more than just political hope — they’re recognizing Israel’s strong performance in key sectors like technology, cybersecurity, and financial services,” Zimra wrote.

She also pointed to the strengthening shekel as a sign of growing investor confidence and macroeconomic resilience, despite ongoing security concerns.

Risk Appetite Returns — With Caution

Zimra notes a clear return of risk appetite, supported by the possibility of a sustainable ceasefire and a return to political normalcy. In addition, the Bank of Israel’s cautious monetary stance, amid controlled inflation, adds a layer of confidence for both local and international investors.

“If Trump’s plan progresses and the ceasefire holds, Israel could see a significant inflow of capital and a bullish mid-term trajectory,” Zimra stated.

Despite the current bullish sentiment, Sandrine Zimra cautions that geopolitical risk remains high. 

The market’s momentum is heavily contingent on how stakeholders — including Hamas and regional allies — respond to Trump’s proposal. Any shift in that dynamic could lead to renewed volatility.