Israel ETFs Plummet Amid Rising Tensions with Iran and Allies

Israeli stocks fell this week as the odds of a full-scale war with Lebanon and potentially Iran and its allies have increased. Tensions have heightened as Israel’s enemies have vowed to take revenge after the assassination of a key Hezbollah member, Fuad Shukr, in an airstrike in Beirut’s southern suburbs on Tuesday and Hamas leader Ismail Haniyeh in Tehran on Wednesday. The TA-35, Israel flagship index has fallen by almost 7% in dollar terms over the past five trading days.

According to Israel, the strike in Beirut was a response to a rocket attack last Saturday, which was blamed on Hezbollah and resulted in the deaths of 12 people, mostly children and teens playing soccer, in the town of Majdal Shams in the Israeli-controlled Golan Heights. Meanwhile, Hezbollah’s chief denied the accusation, stating that the incident was caused by a stray defensive missile from Israel’s iron dome.

Nasrallah emphasized that Israel and those responsible for Shukr’s death must “inevitably wait for our next response,” asserting that “there is no discussion or debate about this,” and reiterating that “between us and you are the days, the nights, and the battlefield.”

Hamas leader Haniyeh was assassinated in his guesthouse in Iran hours after attending the inauguration ceremony for Iranian President Masoud Pezeshkian. Iran’s leadership vowed to avenge Haniyeh’s death, stating that the attack on Israel will occur very soon.

Israeli security forces are reportedly on high alert amid massive threats of attack from its archenemies. Israeli TV station Channel 12 reported that the attacks threatened by Iran and the Lebanese Shiite militia Hezbollah are expected to take place “on several fronts.”

This indicates that in addition to Hezbollah, other armed groups backed by Tehran may participate in the aggression against Israel. These include the Houthis in Yemen and militias loyal to Iran in Iraq and Syria. The Israeli leadership is currently discussing possible responses to such a coordinated attack, including “a readiness to enter into an all-out war in this context.

Israel ETFs Under Stress to Watch

With Israeli stocks feeling the heat, it’s no surprise that ETFs tracking these stocks have followed suit. Using the Trackinsight screener, we can see that there are four Israel ETFs available for U.S. investors, all of which have seen their performance decline over the past week.

The largest Israeli-tracking ETF, the iShares MSCI Israel ETF (EIS), fell by 5.1%, while Cathie Wood’s passively-managed fund, the ARK Israel Innovative Technology ETF (IZRL), was hit the hardest, falling by 7.5% over the week.

While it seems like things might escalate, investors who believe that conditions in Israel will eventually stabilize in the long term might see this as a buying opportunity.

The iShares EIS tracks the MSCI Israel index and provides exposure to a broad range of companies in Israel. Its top 10 holdings account for 56% of the assets and include names like Teva Pharmaceutical (9.8%), Check Point Software Technologies (8.37%), and Bank Leumi (6.5%), among others.

The fund has been trading on the NYSE since its inception in 2008 and has an expense ratio of 0.59%.

You can compare EIS with other Israel ETFs using Trackinsight’s Fund Compare tool. Here’s a link to get you started.

Israel ETFs comparison.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.