Billions in capital flight from the Tel Aviv Stock Exchange after the war with Iran.

Billions in capital flight from the Tel Aviv Stock Exchange after the war with Iran.

The Israeli stock market has seen a significant outflow of foreign investment in the wake of the 12-day war with Iran. According to the Tel Aviv Stock Exchange (TASE) Research Unit, foreign investors sold about 2 billion shekels ($589 million) of their shares between mid-June and the end of July 2025.

This was the first significant decline in foreign investment in the Israeli stock market this year, with net foreign purchases falling to 8.5 billion shekels from 10.5 billion shekels at the beginning of the year.

According to Udi Nir, head of TASE Research, foreign investors played a major role in buying stocks before the war with Iran, especially in the banking (6.2 billion shekels) and defense industries (1.9 billion shekels).

However, in July, these investors turned to a broad sell-off in sectors such as biotechnology, insurance, real estate, banking, and bought only a small amount (200 million shekels) in defense stocks. This trend reflects the decline in foreign investor confidence in the Israeli market after the recent tensions.

In contrast, domestic investors tried to fill the void left by the outflow of foreign capital. In July, local investors bought stocks worth 2.9 billion shekels, up from 1.9 billion shekels in June. Domestic financial institutions also joined the positive trend by buying 600 million shekels of stocks in July. However, these efforts could not fully offset the negative effects of foreign capital outflows.