The Israeli capital market opened on June 16, 2025, with somewhat surprising gains, despite the complex security situation and ongoing attacks from Iran. While investors await further trends in global markets, the local exchange appears to be resilient, particularly in specific sectors. The question that arises is whether this is based on optimism or a direct economic reaction to the consequences of the current conflict.

Key Index Data and the Leading Role of Construction Stocks

The TA-125 Index, which comprises the 125 largest and most traded companies on the Tel Aviv Stock Exchange, rose by 1.2%, while the TA-35 Index, consisting of the 35 highest market-cap stocks, climbed by 0.8%. The Tel Aviv Banks Index also showed a gain of 1.3%, indicating a certain stability in the financial system. However, the most striking figure today is the surge in the Construction Index, which recorded a dramatic increase of 5.6%. This sector stands out exceptionally, with construction companies such as Aura jumping by 7.2% and Inrom surging by 9.6%. Other stocks in the sector, like Shikun & Binui, added 7.7% to their value, Israel Canada leaped by 6%, and Acrstain rose by 6.1%.

The sharp rise in construction stocks, particularly against the backdrop of extensive damage to Israeli buildings from Iranian missile attacks, suggests that the market is already pricing in the future need for reconstruction. Under normal circumstances, security events with destructive impacts on infrastructure would be expected to lead to declines in stock prices. However, in this case, investors appear to identify significant business potential in the medium and long term. It is possible that the market is pricing in anticipated government and private investments in construction and rehabilitation, which provides a tailwind for companies operating in this field.

Conflicting Trends and Notable Company Reports

Alongside the gains in the leading indices and construction stocks, there were also conflicting trends. Energean, an energy company operating in natural gas, recorded a 5% drop. This decline is particularly notable given the overall market rise and the strengthening of global oil prices, which increased by almost 1% in the morning hours. Energean’s performance could stem from company-specific factors or issues within its operational domain, possibly related to regulation, drilling reports, or investor expectations. In contrast, Ashdod Oil Refinery stock surged by 6.9%, indicating performance differences among various companies in the energy sector.

Concurrently, there was a delay in the opening of trading for Bazan shares and those of its controlling shareholder, Israel Petrochemical Enterprises. The company reported “unclarity” and announced that trading would resume only after an official report is published on its behalf. This situation reflects the high sensitivity of the capital market to corporate disclosures, especially during periods of uncertainty.

In the aviation sector, a degree of caution was observed. El Al climbed by 1%, while Israir remained stable. Airlines continue to face challenges from the conflict, with El Al announcing flight cancellations until June 19 and Israir extending its flight freezes until the end of the month. This situation highlights the direct impact of the security situation on these companies’ business operations and investors’ expectations from them.

Impact of Security Developments and Global Markets

Trading on the Tel Aviv Stock Exchange is taking place under the shadow of the ongoing conflict with Iran. Eight people were killed and over a hundred injured overnight as a result of Iranian missile strikes. Despite their severity, these events did not lead to a collapse in the local market; in fact, on the first trading day following the outbreak of the war yesterday, surprising gains were recorded. The TA-35 Index closed with a 0.5% increase, and the TA-125 rose by 0.4%. This response may indicate a certain economic resilience or a perception that the market has already adjusted to a high level of risk, and perhaps even incorporates the economic consequences of the situation.

On the global stage, futures on US indices showed very slight gains in the morning hours, while the Tokyo stock exchange rose by 1% and Hong Kong fell by 0.1%. Oil prices, as expected during a period of geopolitical tension, increased by almost 1%. The yield on US 10-year bonds remained stable at 4.43%, while the yield on Israeli 10-year bonds stood at 4.62% this morning after a 4-basis point rise yesterday. The data shows that the Israeli market is not detached from global trends but also exhibits its unique dynamics, directly influenced by the security situation and the resulting needs.

Looking Ahead: Will the Resilience Endure?

The gains observed on the Tel Aviv Stock Exchange, particularly in the construction sector, could indicate deeper processes than just a momentary reaction. It is possible that the market identifies the potential for increased economic activity related to reconstruction and recovery. However, it must be remembered that this resilience is constantly tested against ongoing security developments. Uncertainty regarding the scope, duration, and long-term effects of the conflict on the Israeli economy continues to loom over the market.

It should be noted that this article aims to provide an in-depth analysis of the economic situation and markets, and not to constitute an investment recommendation. Developments in the Israeli capital market will continue to depend on a variety of factors, both domestic and global, with security considerations remaining a significant component in the equation. Investors will continue to monitor company reports, macroeconomic data, and developments in the political-security arena to better understand the direction in which the market is heading.