JPMorgan estimates Israel's October 27 election could move the shekel by as much as 3% in either direction. The bank sees an opposition victory as the likelier outcome, which could strengthen the shekel, while a Netanyahu win could send it lower and a hung result would likely leave it broadly steady.
Israel's October 27 election could swing the shekel by up to 3% in either direction, JPMorgan said in a report published Thursday. The bank's analysts see market odds increasingly pointing to an opposition victory led by former military chief Gadi Eisenkot, though they cautioned the arithmetic remains complex and that polls have often underestimated Prime Minister Benjamin Netanyahu's Likud party.
An opposition win is JPMorgan's base case
Under its base assumption of an opposition victory, to which it assigns a 55% probability, JPMorgan estimates the shekel could strengthen 2% to 3% as concerns about institutional reforms ease. Major shifts in fiscal or economic policy are unlikely, but the bank said the result would likely shape relations with Western allies and investor perceptions of Israel's judicial system reforms and its policies in the West Bank and Gaza.
A Netanyahu win points the other way
In contrast, another win for Netanyahu, who has dominated Israel's political landscape for the past two decades, could cause a 3% drop in the currency. A third scenario — a broad coalition and prolonged political uncertainty — would instead keep the shekel broadly steady, JPMorgan said.
The shekel has previously shown sensitivity to institutional concerns. JPMorgan noted it weakened nearly 10% against the dollar between early 2023, when contested judicial reforms were proposed, and the October 7 Hamas attack that year.
Options market pricing looks light
Despite the differing scenarios, JPMorgan said the overall risk-reward was broadly balanced at this stage, citing the strength of Israel's technology sector, a favourable external backdrop, and potential resistance from the Bank of Israel to excessive currency strength. Current implied-volatility pricing in the FX market only points to about a 1% move around the election, which the bank's analysts said: "seems low".
Source: Investing.com
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