Israel-Iran war: Israeli stocks surged to record highs on Sunday following U.S. strikes on Iran’s nuclear facilities, which investors believe will delay Tehran’s ability to develop nuclear weapons.

The broad Tel Aviv 125 index closed up 1.8%, bringing its gains for the week to nearly 8%, while the blue-chip TA-35 (.TA35) rose by 1.5 per cent.

Following Israeli strikes on Iran, the stock market posted gains throughout all five sessions last week, rising around 6 per cent, as Israel targeted Iranian nuclear and military sites ahead of the unexpected U.S. attacks on Saturday.

Meanwhile, other Middle East countries stock market also witnessed strong rally amid ongoing tensions. Kuwait stock market indices Boursa Kuwait Premier Market Index was up nearly a per cent to 8,650.6.

Meanwhile, in Muscat, Oman, the MSX30 Index was trading 0.50 per cent up to 4,525.31.

What’s behind the rally?

U.S. President Donald Trump announced that he had destroyed Iran’s key nuclear facilities in overnight strikes using powerful bunker-busting bombs, aligning with an Israeli offensive in a major escalation of tensions in the Middle East.

“The destruction of Iran’s key nuclear facilities by the U.S. military is, of course, a positive development … in terms of improving the regional security environment and reducing Iran’s military and nuclear capabilities,” said Mizrahi Tefahot chief markets economist Ronen Menachem, was quoted as saying by Reuters.

Israel launched intense strikes on Iranian nuclear sites, ballistic missile production centers, and senior military figures on June 13, prompting retaliatory attacks from Iran in response.

Tehran pledged to protect itself and retaliated on Sunday by launching a barrage of missiles at Israel, injuring dozens and causing significant destruction to buildings in Tel Aviv.

“Looking at the medium- to long-term — which is relevant for many strategic investors — this could represent a genuine opportunity, possibly related to the prospect of closer ties between the Saudi and American axis,” Menachem said.

(With inputs from Reuters)

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