Shekel drops 1.5% as tensions soar over potential Iranian attack

Shafaq News/ On Monday, the Israeli shekel dropped 1.5% against the dollar, and Tel Aviv shares fell over 1%, as investor fears grow over a potential attack from Iran and Hezbollah.

Recent Israeli assassinations of Hezbollah’s top military commander Fouad Shukr in Beirut and Hamas’s political leader Ismail Haniyeh in Tehran have heightened regional tensions, with Iran and Hezbollah vowing retaliation.

Yonie Fanning, chief strategist at Bank Mizrahi-Tefahot, said, “We anticipate significant repercussions from the Iranian response, which is likely to create volatility.”

In addition, Hasnain Malik, head of equity research at Tellimer affirmed, "Expectations of a ceasefire are low and declining and the spectre of an Iranian retaliation remains.”

"The shekel is struggling to hold on to last week's gains amid rising market concerns that an attack by Iran on Israel could be imminent, based on comments from various officials from both sides," affirmed Piotr Matys, senior FX analyst at InTouch Capital Markets.

By 12:55 GMT, the Israeli shekel fell to 3.77 per dollar, down from 3.72 on Friday but higher than the session's low of 3.78.

The shekel has risen 0.1% against the dollar since August but has lost 5% of its value in 2023, as emerging market currencies struggle due to the dollar's strength. Meanwhile, stock indices in Tel Aviv dropped by 1.25% to 1.5%.

On Friday, Iranian news agencies reported that an Iranian Revolutionary Guards deputy commander announced Iran's intention to "harshly punish" Israel in response to the July 31 assassination of Haniyeh, as ordered by Supreme Leader Ayatollah Ali Khamenei.

Two days later, Israeli Defense Minister Yoav Gallant informed US Defense Secretary Lloyd Austin that Iran is preparing for a major military attack on Israel.