Growing unrest in the Middle East has cast a shadow on global financial markets.
Israeli stocks listed in New York and Tel Aviv have sunk to recent lows, underscoring the growing economic uncertainties in the war-torn region and leaving investors unsure of where markets go from here.
What's happening: For a country about the size of New Jersey, Israel has an outsized influence on the US stock market. More than 100 Israeli companies are listed on US exchanges, with a combined market cap of more than $150 billion -- Israel has the fourth most companies listed on the Nasdaq after the United States, Canada and China.
Funds in the US hold more than $43 billion in Israeli stocks and bonds, according to a Bloomberg tracker.
But conflict between Israel and Hamas has sent stocks tumbling along with the shekel, which has dropped for six days straight to an eight-year low even after the Bank of Israel announced an unprecedented $30 billion program to bolster the currency.
"We anticipate continued volatility in Israeli equities in the coming weeks, especially those companies with heavy exposure to Israel's domestic economy," said Steven Schoenfeld, CEO of MarketVector Indexes.
On Friday, JPMorgan Chase CEO Jamie Dimon told investors that "now may be the most dangerous time the world has seen in decades." The Israel-Hamas war and the war in Ukraine, he said, "may have far-reaching impacts on energy and food markets, global trade and geopolitical relationships."
The $116.92 million iShares MSCI Israel exchange-traded fund, the biggest ETF exposed to Israeli stocks, hit its year-low for the fifth time in one month on Monday and saw about $5 million in net outflows last week.
The ARK Israel Innovative Technology ETF gained back 0.5% on Monday after falling by more than 4% on Thursday and Friday.
The TA-35, a benchmark index for the Israeli stock market, has dropped by about 2% in the past five days.
The turmoil comes during an already shaky year for markets as Israeli prime minister Benjamin Netanyahu enacted controversial judicial reform that led to protests around the country. The TA-35 is down nearly 6% year-to-date.
Big names, big exposure: As the war continues, businesses with headquarters, factories and inventory in Israel appear increasingly at risk to geopolitical turmoil.
Shares of autonomous vehicle chip maker Mobileye Global, the largest company in Israel based on market cap, have fallen by about 9% over the past five trading days.
Tower Semiconductor, another chipmaker based in Israel, fell by about 4.3% over the same period.
Israel's Teva Pharmaceutical, the largest generic drugmaker in the world, fell by about 1%.
Looking forward: What comes next depends on how the war plays out in the Middle East, said Raffi Boyadjian, an analyst at XM, in a note. "If the war remains confined between Israel and Palestinians, it's likely that the markets will forget about it after a few days," he wrote.
Since World War II, military shocks resulted in average declines for the S&P 500 up to 30 days after the event, said Sam Stovall, chief investment strategist at CFRA. But stocks, he said, typically recovered 60 days after the event.
There have been, he warned, "several instances that triggered or exacerbated US recessions and bear markets, such as the Yom Kippur War in 1973 and Iraq's invasion of Kuwait in 1990."
Add these concerns to still-elevated inflation rates and worry about the upcoming corporate earnings season, he said, "and one can understand why investors may think stock price gains could stall."
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