While the dynamism of the Israeli economy (
EIS
,
quote
) continues to outshine its Middle eastern peers, the looming
threat of conflict in the region would destabilize the technology
hub. This begs the question: how should investors treat the
prospect of war with Iran?
[caption id="attachment_70999" align="alignright" width="300"
caption="Apache helicopters of the Israeli and Hellenic Air Forces
fly together in a joint aerial exercise."]
[/caption]
Over the past decade or so, the Israeli economy has developed
into a world-beating innovator. With tech sector darlings like Teva
Pharmaceuticals (
TEVA
,
quote
) and Mellanox Technology (
MLNX
,
quote
) revolutionizing a wide array of 21st century sectors from
biotechnology to computing, the Israeli economy is one of the most
dynamic in the world.
Unfortunately,
Israel's economy
cannot be treated as if it exists in a vacuum that obviates the
effects of local politics. Because of the country's history,
fraught with unresolved disagreement and conflict with neighbors,
the Israeli economy remains exposed to potential national
struggles.
Recently Israel has engaged in heated rhetoric with Iran over
the latter's nuclear program and while it remains to be seen
whether conflict will materialize, it's important to evaluate how
armed engagement would affect the Israeli economy.
When evaluating Israel, you have to
eliminate normative sentiments as to whether the country and
its actions are justified or wrong
. And, unequivocally, conflict with Iran would adversely affect the
Israeli economy.
While it's a common refrain in America that war helps an economy
because of the conflation of World War II and the emergence from
the Great Depression, this 20th century trite-ism is not
particularly apt for modern warfare. War with Iran would at minimum
cost the Israeli government
billions of shekels
, and this is assuming that the conflict is confined to areas
outside of Israeli sovereignty. If the Iranians were to
counterstrike in Israeli territory, the potential pitfalls for the
economy are massive.
Investors should probably think twice before investing in the
Israeli economy until the rhetoric between Israel and Iran
cools.
