Why Is the Israeli Shekel Getting Stronger Despite the War?

At first glance, it seems surprising that Israel’s currency, the Israeli Shekel, has remained strong and even appreciated at times despite ongoing geopolitical tensions and war. Normally, wars create uncertainty, scare away investors, and weaken a country’s currency. However, Israel’s economy has shown unusual resilience due to several powerful factors working in its favor.

One major reason is the strength of Israel’s technology sector. Israel is often called the “Startup Nation” because of its globally competitive cybersecurity, AI, semiconductor, and software companies. Large multinational firms continue to invest in Israeli tech, bringing foreign currency into the country. Even during conflict, many investors still view Israel’s innovation economy as strong in the long term.

Another key factor is the role of the Bank of Israel. The central bank holds large foreign exchange reserves and has actively intervened in currency markets when needed to stabilize the shekel. This reassures investors that the country has enough financial strength to defend its currency during periods of uncertainty. In addition, Israel’s exports in defense technology and high-end services continue generating steady dollar inflows.

Global investor psychology also plays an important role. Financial markets often react not only to war itself, but to whether the conflict threatens long-term economic survival. Many institutional investors believe Israel’s economy can recover quickly after crises, as it has done multiple times in the past. As a result, confidence in the shekel has remained stronger than many expected despite the ongoing conflict.

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