Analysis-Israel's war-wary markets start to attract investors back
By Steven Scheer and Marc Jones
JERUSALEM (Reuters) — A month on from the Oct. 7 attack by Hamas gunmen that killed 1,400 Israelis, investors are gradually returning to country's financial markets, warily accepting the descent into its worst security crisis in decades.
Although a significant weakening of the dollar over the last week has helped, Israel's shekel marked a remarkable comeback on Tuesday as it recouped the last of the 5% it lost in the days after last month's atrocities.
The country's stocks and bond prices have been clawing back ground too, although they and the main market gauges of risk aversion such as credit default swaps (CDS) are still flashing warning signs.
«The fact that the fighting is only in Gaza (for now) and not in the north is helping local investors to focus on the (economic) fundamentals,» said Yaniv Pagot, head of trading at the Tel Aviv Stock Exchange.
Israel's response to the attacks, which included the abduction of more than 240 Israelis, has been an unrelenting air bombardment of the Hamas-run Gaza Strip, followed by a ground offensive.
The initial fear of many analysts was of it spilling into a more incendiary regional conflict involving Iran-backed Hezbollah in Lebanon, but so far the group has not waded in.
Israel's central bank has played its part too with a flurry of support measures, and has stayed away from rate cuts. It has acknowledged the economy will slow, but points out it was in solid shape prior to the war and should bounce back, as in past conflicts, if it eases.
«We have known how to recover from difficult periods in the past and to return rapidly to prosperity. I have no doubt that it will do so this time as well,» the bank's Governor Amir Yaron said.
At the outset
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