By Dominic Chopping
Israeli stock markets are seeing modest gains in early trade Tuesday despite continued fighting in the country, with the benchmark Tel Aviv 35 index rising 0.4%.
The TA35 fell 6.5% on Sunday after terror group Hamas killed hundreds and took hostages over the weekend.
The country's currency has weakened sharply over the past couple of days, falling around 2.8% against the U.S. dollar yesterday to its lowest level since 2016. The shekel has stabilized somewhat Tuesday and currently trades around Monday's multi-year low.
After the country's bonds sold off Monday, the yield on the 10-year note touched 4.6% but has fallen below 4.5% this morning. It was below 4.3% toward the end of last week.
Oil prices have retreated slightly after supply concerns caused a sharp jump Monday. The fighting in Israel and Palestine sparked concern of possible tougher sanctions against Iran, which could reduce supply.
Natural gas prices are continuing to move higher though, adding to strong price gains seen Monday over supply worries. Chevron was instructed to halt supply of natural gas from the Tamar gas field off the southern coast of Israel amid fighting in the country, with the shutdown likely to tighten liquefied natural gas markets.
Shares of European defense contractors were among the biggest winners Monday and most have continued to gain Tuesday, with BAE Systems, Dassault Aviation, Thales, Leonardo and Rheinmetall all seeing their stock price rise further, in line with higher European indices.
"The weekend's horrific events in Israel and the new war with Gaza are so far having a relatively limited impact on the financial markets," SEB analysts said in a note.
"Should more countries be drawn into the conflict, the risk picture could of course change," they added.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
10-10-23 0526ET
