The forex market opened Wednesday morning with the dollar gaining around 0.8%, trading above 3.8 shekels - a six-month high. Trading room sources said that most of the activity is coming from institutional investors moving funds out of Israel. This follows the sharp impression left by Prime Minister Benjamin Netanyahu's so-called "ambush" meeting with Trump, and the formal implementation of the tariff plan today.
Trading analysts explained the dollar's behavior this morning as follows: Trump's "ambush" meeting with Netanyahu gave the impression that Trump had pulled a "Zelensky move" on the Israeli prime minister. If previously one might have expected a deal to dismantle Iran's nuclear capabilities to reduce Israel's risk premium, the current sentiment is the opposite - that Netanyahu's government could end up complicating relations with the supportive US administration.
What does this mean? For now, it suggests that Israel's risk profile has actually increased, since Trump has shown no intention, at least for the moment, of removing tariffs on Israel. On the contrary, he appears to be moving toward a deal with Iran over Israel's head, as if Netanyahu were Zelensky and Israel were Ukraine.
It is unclear how these developments will impact internal dynamics within Netanyahu's government. However, given the lack of confidence in Israel's economy under the current administration, the risk of someone making a wrong move is perceived as greater than the likelihood of a right one. This has led investors to one conclusion: pull back from Israel for a while.
Attempting to impose some economic logic on the chaos, some analysts suggest the following interpretation: new long-term opportunities have emerged in the US market, making it more feasible to start taking risks there.
