Despite the continued fighting in Israel, the country's stock markets are experiencing modest gains in early trade on Tuesday. The benchmark Tel Aviv 35 index has risen by 0.4%.
On Sunday, the TA35 fell by 6.5% following a series of attacks by the terror group Hamas, which resulted in numerous casualties and the taking of hostages.
The country's currency has also witnessed a significant weakening over the past few days, declining approximately 2.8% against the U.S. dollar yesterday, reaching its lowest point since 2016. However, the shekel has shown some stabilization on Tuesday and is currently trading around Monday's multi-year low.
After experiencing a sell-off on Monday, the yield on the country's 10-year bonds reached 4.6%, but it has since dropped below 4.5% this morning. Last week, it had fallen below 4.3%.
Oil prices have slightly retreated since Monday's significant jump due to supply concerns. The conflict in Israel and Palestine has raised worries about potential stricter sanctions against Iran, which could lead to reduced supply.
Meanwhile, natural gas prices continue to rise, building on the strong gains witnessed on Monday due to supply worries. Chevron has been instructed to halt the supply of natural gas from the Tamar gas field off the southern coast of Israel due to the ongoing fighting. This shutdown is expected to tighten liquefied natural gas markets.
European defense contractors were among the top winners on Monday and most of them have continued to perform well on Tuesday. Companies such as BAE Systems, Dassault Aviation, Thales, Leonardo, and Rheinmetall have all seen their stock prices rise further, in line with the overall upward trend in European indices.
According to SEB analysts, the financial markets have been relatively unaffected by the weekend's horrific events in Israel and the new conflict with Gaza. However, they acknowledged that if more countries become involved in the conflict, the risk landscape could change.