Israel’s Equity Surge: Analyzing the iShares MSCI Israel ETF Trajectory

iShares MSCI Israel ETF US4642866325

Israel's economic outlook is gaining significant momentum, setting the stage for a potentially transformative period for its stock market. The Bank of Israel has projected a robust GDP expansion of 5.2% for 2026, a forecast underpinned by expectations for a sustained de-escalation of regional tensions. For investors tracking the iShares MSCI Israel ETF (ticker: EIS), this macroeconomic shift represents a pivotal development following an already impressive performance in 2025.

The Tel Aviv Stock Exchange (TASE) has demonstrated remarkable strength. In 2025, the benchmark TA-35 index surged by 51.6%, while the broader TA-90 index advanced 46.6%. Sectors such as finance and defense attracted considerable attention from international investors. This activity fueled a 57% year-over-year increase in the exchange's average daily trading volume, which reached $1 billion.

A critical question is whether this pace can be maintained in light of fiscal challenges. The government budget deficit stood at 4.9% of GDP in January 2026; however, the central bank anticipates it will narrow to 3.6% by year-end. The projected 5.2% growth rate marks a notable acceleration from the prior average of approximately 3.5%.

ETF Composition and Operational Shifts

The iShares MSCI Israel ETF, with assets under management of approximately $777 million, offers exposure to 118 Israeli companies. Its portfolio is heavily weighted toward technology and financial firms, with top holdings including NICE, CyberArk, and Elbit Systems. Year-to-date, the fund has delivered a net asset value (NAV) return of 7.20%. Its expense ratio of 0.59% is considered competitive within the single-country ETF segment.

A significant operational change occurred in early January when the TASE aligned its trading week with major global exchanges, shifting from Sunday-Thursday to Monday-Friday. Index provider MSCI has confirmed this adjustment will not adversely affect the pricing mechanism of the iShares MSCI Israel ETF.

Key Investor Considerations

• Growth Forecast: The Bank of Israel expects 2026 GDP to grow by 5.2%.
• Equity Rally: The TA-35 index posted gains exceeding 51% during 2025.
• International Investment: Foreign capital inflows into Israeli equities recently totaled $1.27 billion.
• Trading Schedule: The TASE has successfully transitioned to a Monday-Friday international trading week.

Looking ahead, the fund's trajectory remains closely tied to geopolitical stability, as renewed tensions could disrupt the current positive outlook. In the near term, market participants are focusing on MSCI's scheduled index review at the end of February. Proposed adjustments to free-float calculations may alter the weighting of specific constituents within the ETF, potentially impacting its performance.