Israel election day - Why global markets are watching closely today

Israel is approaching a crucial election after years of conflict and political uncertainty. Global investors are closely watching how the outcome could affect Israeli stocks and the shekel as well as foreign investment and regional stability

Israel’s national election is to be held on 27 October 2026 and has attracted a ton of international attention because the result could change the country’s foreign relations and economic outlook after years of conflict and uncertainty. It is the first national election since Hamas attacked Israel on 7 October 2023 followed by wars involving Gaza along with Lebanon and Iran.

Netanyahu has an aim to remain in power despite opposition from rival groups led by former military chief Gadi Eisenkot. His opposition alliance has promised political change and opinion polls suggest that Netanyahu’s ruling bloc could lose support. The opposition also faces difficulties because it must build a workable governing coalition. Israel’s parliament which is known as the Knesset has 120 seats and a government generally needs the support of at least 61 lawmakers to secure a majority. It is highly likely that smaller parties and coalition talks could play a decisive role in determining the election result.

Why financial markets care about the result

The election is important to investors because Israeli stocks and the shekel have performed remarkably well despite prolonged conflict and political uncertainty. The Tel Aviv stock market has risen by approximately 130% since the October 2023 attacks and this gain is significantly higher than the US stock market’s surge of roughly 80% over the same period. The shekel has also appreciated by approximately 25% and ranks among the best performing currencies worldwide. Israel’s technology sector has supported these gains along with the artificial intelligence boom and higher defence spending. These trends show that domestic businesses have continued to attract investor interest despite geopolitical risks but the strong performance of financial assets has not removed concerns about foreign investment. Only 19% of global funds held Israeli equities compared with 34% in 2023. Investors are therefore assessing whether a change in government could improve international relations and reduce political uncertainty. Such changes could also encourage more foreign capital to return to the country. Some investors believe an opposition led government could create opportunities for further market gains. Currency traders will pay close attention to the shekel because its value could respond quickly to changes in expectations about political stability and economic policy.

What investors should watch next

Investors must look beyond the immediate election result and assess Israel’s fiscal position along with the economic impact of prolonged conflict. Wars have cost the economy more than US$55 billion and Public debt has also risen to nearly 70% of gross domestic product. The next government’s decisions on defence spending and budget discipline could affect investor confidence. Its approach to judicial institutions and international relations will also influence the country’s long-term economic prospects.

Security policy will be a major concern because renewed regional escalation could weaken business confidence and put further pressure on government finances. Higher tensions could also affect energy prices and broader market sentiment. Investors will monitor whether the new administration can improve relations with Western partners and address concerns that have discouraged some foreign investors from holding Israeli assets. Market uncertainty may persist even after voting ends because the election process involves several stages. Exit polls will offer early indications of the result but the final distribution of seats and subsequent coalition negotiations will determine whether a stable government can emerge. The final tally is expected by 30 October while the official results are due on November 4. The key question is not simply which side wins the election but what matters more is whether the result creates a more predictable environment for economic policy and international investment while improving the outlook for regional security.

(Source: Reuters)