Israelis began voting on Tuesday, October 27, 2026, in a general election where Prime Minister Benjamin Netanyahu faces a challenge from former military commander Gadi Eisenkot. Financial analysts and prediction markets are monitoring the results for their potential impact on Israel's economy. While Netanyahu’s Likud party and Eisenkot are in a close contest, opinion polls suggest neither may immediately secure the 61 seats required for a majority in the 120-seat Knesset.
The election follows a period of growth in Israeli financial markets despite the October 7, 2023, attacks and subsequent war. Since those events, the Tel Aviv stock exchange has risen 130 percent, and the shekel has appreciated by 25 percent. Financial analysts attribute this performance to the technology sector and defense spending rising to approximately 8 percent of Gross Domestic Product (GDP). However, foreign investment has declined, with global funds holding Israeli equities dropping from 34 percent in 2023 to 19 percent in 2026.
JPMorgan analysts reported that an opposition victory could strengthen the shekel by improving relations with Western allies and ending a judicial overhaul that prompted mass protests in 2023. Conversely, the bank noted that a Netanyahu-led government could weaken the currency, with total fluctuations potentially reaching 3 percent depending on the outcome. Billionaire investor Bill Ackman stated that a government excluding far-right ministers Itamar Ben-Gvir and Bezalel Smotrich would signal a "new page" for the country's international credibility.
The scale of the economic impact is significant, with the war estimated by the central bank to have cost more than $55 billion in cumulative lost GDP growth as of last year. A clear result would allow for the passage of budgets and economic reforms, while a deadlock could prolong volatility. Tel Aviv Stock Exchange research shows that volatility in share indexes typically rises by 45 percent in the weeks following an election. The central bank head, Amir Yaron, emphasized the need to preserve fiscal policy space due to the conflict with Iran.
What happens next: Polls close on the evening of Tuesday, October 27, 2026. If no party secures a clear 61-seat majority, as currently projected by opinion polls, the country will enter a period of coalition negotiations. Historically, initial market losses after Israeli elections are recovered within a month, with the TA-125 index averaging a 16.4 percent return in the year following a vote. If negotiations fail, the country could face another election cycle, potentially delaying budget deficit reduction plans.