Israel geopolitics and macro - outlook for the week ahead

ISRAEL - In Brief 20 Feb 2026 by Sani Ziv

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Rising war tensions with Iran pressure markets as Gaza peace plan begins to take shape This week was marked by rising tensions with Iran, which translated into growing nervousness in financial markets, ahead of next week’s interest rate decision. Reports of a possible U.S. strike and increased military deployments in the region pressured Israeli assets. On Thursday, Tel Aviv’s main indices declined, led by the banking sector, the shekel weakened, and the dollar strengthened to 3.136. The nominal effective exchange rate depreciated by 0.95% on the day, while bond yields edged modestly higher, reflecting cautious positioning rather than outright panic.(In today’s session, the shekel partially recovered as statements from the US reduced the likelihood of an immediate strike). Against this backdrop, the first session of the Board of Peace convened in Washington under U.S. President Donald Trump. Representatives from 47 countries and international organizations discussed Gaza’s reconstruction and regional stabilization, with an initial $7 billion pledged toward rebuilding efforts. Recruitment for a new Gaza police force has begun, with around 2,000 applications reportedly submitted. Five countries—Indonesia, Morocco, Kazakhstan, Kosovo, and Albania—have agreed to contribute troops to a proposed international stabilization force, while Turkey also declared its readiness to deploy forces. Trump’s vision rests on an ambitious framework: a Board of Peace, a new Palestinian police force, Hamas’ demilitarization, a multi-year reconstruction plan, and Gaza’s integration into the regional economy through the proposed “Abraham Gate” project. However, according to local commentators,...