© Reuters. FILE PHOTO: Israeli Prime Minister Benjamin Netanyahu looks on as he convenes a weekly cabinet meeting amid waves of violence in Jerusalem and the West Bank, at the prime minister’s office in Jerusalem January 29, 2023. REUTERS/Ronen Zvulun/Pool
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By Steven Scheer and Maayan Lubell
JERUSALEM (Reuters) – Shares in Tel Aviv fell on Sunday as analysts cited investor jitters over planned judicial changes by Israel’s far-right government and after a Palestinian gunman killed seven people outside a synagogue in a Jerusalem suburb.
The blue-chip Tel Aviv 35 index was 1.% lower in afternoon trade, while the broader TA-125 index fell 1.7%.
Government bond prices fell as much as 1%. While the currency market was closed on Sunday, the shekel depreciated 2% against the dollar on Thursday and Friday.
Jonathan Katz, chief economist at Leader Capital Markets, said stocks fell “for the same reason the shekel is weakening – concerns about judicial reform.”
Israeli Prime Minister Benjamin Netanyahu’s office declined to comment to Reuters. On Friday, Netanyahu defended a legal reversal proposed by his cabinet that seeks to strengthen political control over bench appointments while weakening the Supreme Court’s ability to rule against laws or policies.
Critics said the move would compromise the independence of the judiciary and undermine Israel’s democratic system of checks and balances.
In a meeting with Israeli businessmen, Netanyahu said the courts would remain independent and Israel’s strong economy would continue to grow.
However, Uri Levin, CEO of Israel Discount Bank, told Netanyahu that in recent days, foreign banks and investors have been selling State of Israel bonds and shekels, which has led to a widening of the yield spread between US and Israeli bonds, a spokesman for Discount confirmed.
Hours later, a Palestinian gunman killed seven people outside a synagogue in a Jerusalem suburb, and a second attack took place in the city on Saturday, prompting Netanyahu to promise a “strong, swift and precise” response.
Israel’s military said on Saturday it was sending additional troops to the occupied West Bank, where months of worsening conflict have resulted in the highest annual death toll, including of Palestinian militants and civilians, in 2022 in more than a decade.
There were no signs that a major military operation was being prepared, and Netanyahu said Israel did not want an escalation.
“The shootings are just another piece of the puzzle” of negative sentiment in Israel, Bank Leumi chief economist Gil Bufman said, pointing to general market concerns about a weakening economy, inflation and a larger budget deficit.
“The question is, what will be the government’s response?” Bufman said, adding that the judicial changes also spooked investors.
The planned overhaul has brought tens of thousands to the streets of Tel Aviv and other cities, and economists have urged Netanyahu to reconsider over fears the changes will politicize the judiciary and undermine its independence.