Fundamentals Favor the Shekel

UBS has revised its USDILS forecasts lower, expecting the Israeli shekel to continue appreciating toward 2.72 by mid-2027 driven by tech sector strength and institutional hedging. Key risks include potential Bank of Israel intervention and renewed regional conflict.

Key Takeaways

• 1.The Israeli shekel has surged due to its linkage with tech/AI-related stocks and increased institutional hedging activity following US stock market gains.
• 2.UBS has lowered its USDILS forecasts to 2.86 for Sep 2026 and reaching 2.72 by Jun 2027, reflecting a trend of shekel appreciation.
• 3.Geopolitical risk premiums have decreased following the US-Iran ceasefire, but risks remain regarding the Strait of Hormuz and tech sector corrections.

Table of Contents

• Our view and risks
• Key drivers
• Factors to watch
• Appendix

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