Local markets shrug off recent Iranian missile attack

ISRAEL - In Brief 15 Apr 2024 by Jonathan Katz
Geopolitics: Iran launched a large-scale drone/cruise/missile attack on Israel Saturday night. Some 200 projectiles were fired, 99% were intercepted. Israel’s defense system performed exceptionally well, in addition to cooperation with other allies including the US, UK, and Jordan. The big question remains Israel’s retaliation and Iran’s subsequent move. We find it encouraging that decisions regarding this conflict will be made by the inner defense cabinet (including Gantz) without the fringe right-wing in the coalition. Hopefully this will not spin out of control. Monetary policy: Rates remained unchanged last on elevated geopolitical risks. The Governor made it clear that if risk (esp. the shekel) had remained stable, rates would have been reduced. The BoI maintained its GDP forecast at 2% this year (5% in 2025), inflation slightly higher at 2.8% NTM (including 0.3% tax impact), and the fiscal deficit forecast was pushed up to 6.6% from 5.8% GDP. Policy rates are expected to reach 3.75% in Q125. Our Inflation forecast: We revise our inflation forecast up to 3.4% NTM. The shekel appreciated by 0.4% last week (against the basket) despite elevated geopolitical risks, following the previous week’s weakening, in part due to the somewhat surprising rate stability decision. The shekel remained optimistically stable in the options market on Sunday. Due to the spike in global oil prices (and a weaker shekel), petrol prices are expected to increase by 4%-5% in May and contribute 0.16% to the CPI. Economic indicators point to steady recovery The Business Tendency Survey in March points to further expansion, except in construction and hotel services. The current situation index ...

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