Israeli Assets Drop Amid Knesset Election Deadlock

Israeli financial assets fell on Wednesday due to the lack of a clear winner in the national elections. The bloc led by Prime Minister Benjamin Netanyahu and the opposition coalition headed by Gadi Eisenkot failed to secure enough seats to form a majority in the Knesset.

With over 66% of the votes counted, Netanyahu's group is expected to win 56 seats. Eisenkot's opposition is projected to take 48 seats while Arab parties hold 16. The Israeli parliament has 120 seats and requires 61 to form a stable government.

The Israeli shekel lost 1% of its value against the US dollar. The Tel Aviv 35 stock index dropped 2.7% during the trading session. Pressure also hit government bonds as yields rose across the interest rate curve.

Two-year note yields rose 6 basis points. The 10-year yield advanced 4 basis points while 30-year bonds climbed 2 basis points. Official results will be released on November 4.

This is the first election since the October 7, 2023 attack. The climate of political uncertainty increases the risk perception for local assets and puts pressure on the national currency against the dollar.