Israeli shares retreat after hitting record highs as US joins offensive on Iran’s nuclear facilities

Israeli shares were trading lower on Monday after they surged to record highs in the previous session. Israel’s benchmark TA-35 index was down 0.6% while broader TA-125 index fell 0.82%.

The rally follows a dramatic escalation in Middle East tensions that began on June 13, when Israel launched a series of strikes on Iranian nuclear facilities, ballistic missile production sites, and military commanders. The Israeli campaign was followed over the weekend by a surprise US intervention. President Donald Trump confirmed on Sunday that American forces had bombed three of Iran's key nuclear sites—Fordow, Natanz, and Isfahan—using bunker-busting munitions.

“We have obliterated Iran’s main nuclear facilities,” Trump said, describing the strikes as a necessary step to curb Tehran’s nuclear ambitions. This marks widening of the regional conflict and signals deepening US involvement in the simmering Israel-Iran standoff.

Iran responded with a retaliatory missile barrage aimed at Israeli cities, wounding scores and damaging infrastructure in Tel Aviv. Despite the hostilities, Israeli financial markets have remained resilient. Investors appear to interpret the military offensive as a short-term strategic advantage that could postpone Iran's ability to develop nuclear weapons, while reinforcing Israel’s security posture, Reuters report added.

Apart from equities, other financial indicators have reflected growing investor confidence. The Israeli shekel has strengthened, government bond prices have climbed, and the country’s risk premium has edged lower over the past week.

However, the broader geopolitical ramifications are grave. Iran, a key oil producer, controls access to the Strait of Hormuz—a critical maritime chokepoint through which a sizeable portion of the world’s crude oil is shipped. Any prolonged disruption or closure of the strait could spike global energy prices and necessitate armed naval escorts for oil tankers, raising the spectre of energy market volatility, analysts noted.