September 2025 Market Insights: Resilience Amid Uncertainty
Market Updates
September marked another month of resilience for Israel’s financial markets — a period defined by sharp headlines, shifting sentiment, and surprising strength. Despite heightened political tension and uncertainty surrounding the Gaza conflict, both local and global markets rallied. The so-called “September Effect,” often associated with weak returns, reversed course entirely: equity and bond prices climbed, supported by optimism around a potential ceasefire framework and renewed global risk appetite.
In Israel, volatility spiked mid-month after Prime Minister Netanyahu’s “Sparta” speech — warning of diplomatic isolation and a more self-reliant economic posture — but investors quickly refocused on fundamentals. Inflation eased to 2.9%, back within the Bank of Israel’s target range for the first time in a year, while the central bank kept its policy rate unchanged at 4.5%, balancing caution with credibility. The Shekel strengthened to 3.306 NIS/USD, its highest level in 12 months, reflecting renewed capital inflows and growing confidence in Israel’s underlying economic stability.
Market Performance in September
Israeli Equities:
TA-35: +4.8% (record high)
TA-125: +4.3%
TA-90: +2.8%
Israeli Bonds:
Tel-Bond 60: +0.9%
Tel-Bond Shekel: +0.4%
The Tel Aviv Stock Exchange: Between Political Turbulence and Market Strength
Despite an increasingly complex political and social landscape — marked by prolonged conflict, partial sanctions, and growing Western isolation — the Tel Aviv Stock Exchange (TASE) continued to post record highs. This resilience contrasts sharply with Israel’s real economy, which faces a widening fiscal deficit, persistent price pressures, and a high-interest-rate environment that has cooled investment and trade.
The divergence reflects a kind of market “FOMO” — investors positioning early for a post-war recovery rally. While such optimism fuels momentum, it can also distort valuations when disconnected from fundamentals. Yet, it also highlights the strength of Israel’s capital markets, which have continued to function efficiently even under stress.
Trading volumes surged in September, and corporate bond issuance ended the Hebrew year with a ~60% jump in volumes, totaling roughly NIS 150 billion — one of the most active periods on record. Activity was led by banks and real estate firms (notably Poalim and Azrieli), alongside significant offerings from Delek Group, Alber, and Enlight. The ability of issuers to meet robust demand — even as geopolitical risk persists — underscores the maturity, depth, and liquidity of Israel’s market infrastructure.
Still, the concentration of issuance and valuation expansion across financial and real estate names calls for caution. Much of the current momentum appears fueled by expectations of a “day-after” normalization, underscoring the need for selective positioning, disciplined analysis, and risk-aware management as fundamentals catch up with market sentiment.
From our perspective at Kotel Investment Management, September reaffirmed a core truth: Israel’s markets remain remarkably adaptive. Even amid uncertainty, investors continue to differentiate between short-term noise and long-term opportunity. As we head into the final quarter of the year, our focus remains on identifying value across the bond market — where elevated yields, improving inflation dynamics, and resilient corporate balance sheets create a favorable backdrop for disciplined, research-driven investing.
About Kotel Investment Management: We serve as a bridge between U.S. capital and Israel’s overlooked fixed income markets, sharing insights and perspective through our research and thought leadership.
This content is for informational and educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities.