Benchmark Tel Aviv 125 index drops more than 3 percent amid uncertainty over who will lead the next government.
Israel’s stock market has fallen sharply amid exit polls showing no clear winner in the country’s parliamentary elections.
The benchmark Tel Aviv 125 index dropped as much as 3.5 percent in early trading on Wednesday as investors weighed the unclear results of Israel’s first election since the start of its genocidal war on Gaza.
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Neither Prime Minister Benjamin Netanyahu’s right-wing coalition nor the opposition bloc headed by Yashar leader Gadi Eisenkot appeared on track to gain a parliamentary majority in the 26th Knesset.
With more than 76 percent of votes counted as of 09:30 GMT, Netanyahu’s coalition was on course to win 54 seats, while Eisenkot’s opposition bloc was headed for 47 seats, according to tallies published by Israeli media.
Sixty-one seats are needed to form a majority in the unicameral parliament.
Israel’s economy has been running hot despite being on a war footing for the past three years amid an influx of investment in the local tech sector.
Gross domestic product (GDP) grew 2.9 percent in 2025 and 3.2 percent in the first half of 2026, according to government figures.
The Bank of Israel last week raised its GDP growth forecast for all of 2026 to 5.6 percent, up from 4 percent, citing ramped-up production by Israeli firms overseas.
The central bank has forecast that GDP growth for 2027 would reach 7.5 percent, far surpassing estimates for advanced economies such as the United States, the United Kingdom, Germany and Japan.