Fitch’s statement highlighted Israel’s diversified economy, strong financial position, and robust high-tech sector as key stabilizing factors. However, the agency pointed to high public debt, ongoing security threats, and political instability as challenges to Israel’s economic outlook.

“The negative outlook reflects the increase in public debt, domestic governance and political challenges, and uncertainties surrounding the conflict in Gaza,” Fitch stated.

Fitch reported a decrease in Israel’s government deficit, which fell to 5.7% of GDP in 2025, down from 6.8% in 2024, due to increased revenues and lower defense spending. However, the agency warned that the approved 2025 budget underestimates the financial impact of the ongoing war in Gaza, forecasting a higher-than-expected deficit of 4.9% of GDP.

Looking ahead, Fitch projects Israel’s economic growth at 3% in 2025 and 3.6% in 2026, anticipating a decline in military mobilization and a boost in investor confidence as large-scale military activity diminishes. The high-tech sector, which demonstrated resilience in 2024, is expected to continue driving growth.

Fitch also expressed concerns about political and governance risks, warning that recent judicial reforms could weaken Israel’s institutional framework. “A reform of the judicial system recently approved by the Knesset, which expands political control over judicial appointments, could undermine checks and balances,” the agency noted. Growing public divisions over governance policies were also highlighted as a risk factor.

Fitch’s analysis suggests that Israel will remain significantly involved in Gaza in the medium term and anticipates renewed conflict, including air and ground operations. However, the agency expects reduced military mobilization compared to 2023, lessening the war’s economic strain.

On a broader regional scale, Fitch acknowledged that Israel’s military actions in 2024 weakened Iranian-backed militias and bolstered its strategic position. While localized security flare-ups may persist, tensions with Hezbollah are expected to remain contained, and Syria’s instability poses fewer short-term risks to Israel.

While maintaining Israel’s rating, Fitch’s continued negative outlook leaves open the possibility of a downgrade in future evaluations. Analysts speculate that, had it not been for recent security escalations and internal political disputes, Fitch might have upgraded Israel’s rating outlook from negative to stable.

This rating decision follows a physical visit by Fitch analysts to Israel, marking the first in-person assessment by a credit agency since the war began. The two other leading rating agencies, S&P and Moody’s, have yet to release their latest evaluations, with Moody’s skipping the current review round and S&P expected to announce its decision next month.

For now, Israel remains rated A by Fitch and S&P, while Moody’s places the country two notches lower at Baa1, underscoring ongoing financial and geopolitical uncertainty.

Main photo: The Fitch Rating logo at their offices in London. Reuters/Reinhard Krause

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Market analysts attribute the shekel’s recent weakness primarily to domestic political and security concerns. The collapse of the ceasefire with Hamas and the resumption of intense fighting have heightened uncertainty in Israel’s economy. This has led to a rise in the country’s risk premium, discouraging foreign investment and weakening the shekel.

Political instability has also played a role. The government’s decision to dismiss Shin Bet chief Ronen Bar, followed by a High Court ruling that temporarily froze the move, has fuelled tensions within Israel’s leadership. The political friction adds to investor anxiety, further pressuring the local currency.

Rafi Ghozlan, chief economist at IBI Investment House, noted that Israel’s market is shifting from a period of ceasefire and potential normalization with Saudi Arabia to renewed military action and legal uncertainties. “The combination of war and legal reform concerns, along with global market declines, is driving the shekel’s weakness,” he explained.

The key question now is whether this trend will persist or if the shekel will stabilize. Over the past year, the currency has fluctuated within a 3.60–3.80 shekel-per-dollar range. Ghozlan suggests that under the current circumstances, the shekel could move toward the weaker end of this spectrum. Therefore, unless geopolitical tensions ease or external economic factors shift in Israel’s favour, the shekel may continue facing downward pressure in the coming weeks.

Image credit: Freepik

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Founded in 2016 by entrepreneurs Guy Goldstein, Alon Khoury, and Nissim Tapiro, Next Insurance specializes in digital insurance solutions tailored for small and medium-sized businesses in the United States. The company utilizes artificial intelligence and machine learning to streamline underwriting and policy approvals, offering coverage across 1,300 different insurance categories. With over 500,000 active customers, Next Insurance has positioned itself as a key player in the digital transformation of the insurance industry.

The acquisition marks a near-complete takeover by Munich Re, which has been investing in Next Insurance since 2017. Prior to the deal, the German reinsurer held a 29% stake in the company. Munich Re and its subsidiary, Argo, will acquire the remaining shares for $1.84 billion from existing investors. According to reports, Argo is expected to generate substantial net profits in the medium term as a result of the transaction.

Despite the acquisition’s positive outlook for Munich Re, not all investors fared equally well. Investors from the company’s 2021 funding round, including Battery Ventures and Israeli fund FinTLV, had backed Next Insurance at a $4 billion valuation. While the current sale represents a modest increase from its late 2023 valuation, it still reflects a 35% decline from its peak. However, sources indicate that 2021 investors had structured protections to minimize potential losses from valuation declines.

The deal also highlights the role of strategic investors in shaping Next Insurance’s trajectory. Previous backers included notable venture capital firms such as Zeev Ventures, Group 11, TLV Partners, and Redpoint, alongside large Israeli institutional investors like Bank Hapoalim, Migdal, and Psagot. Additionally, insurance giants Allianz X and Allstate played a strategic role in expanding Next Insurance’s market reach, particularly in real estate and auto insurance.

CEO and co-founder Guy Goldstein hailed the acquisition as a milestone for the company. “This transaction will accelerate our mission to provide an easy, efficient, and personalized insurance experience for small business owners. With the strength and expertise of ERGO and Munich Re, we will continue leading the small business insurance revolution in the U.S.,” Goldstein stated in a press release.

Image credit: The logo of reinsurance company Munich Re Group at their headquarters in Munich, Germany. REUTERS/Andreas Gebert

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Founded in 2018 and headquartered in Kibbutz Yifat, Beyond Oil is led by co-founder and CEO Yehonatan Or. The company has developed an innovative technology aimed at addressing the health risks associated with reusing frying oil. By maintaining optimal oil quality throughout the frying process, Beyond Oil’s solution reduces costs by up to 50% while simultaneously lowering customer complaints and minimizing carbon footprints.

Beyond Oil’s recent success is attributed in part to its aggressive geographic expansion. The company has entered several key markets, including the U.S., Mexico, Australia, South Africa, India, and the Philippines. A significant milestone was reached at the start of 2025 when Beyond Oil signed a U.S. distribution agreement with Latitude, securing purchase commitments worth $8.3 million for the year.

Further boosting investor confidence, Beyond Oil recently announced a $10.5 million Canadian dollar investment (approximately 26.6 million shekels) from Clal Financial Management. As part of the deal, Beyond Oil issued 3 million stock units to Clal at a price of 3.498 Canadian dollars per unit, with additional options that, if exercised, could bring in another $21 million CAD.

Following this latest investment, Beyond Oil’s market capitalization has reached approximately 276 million Canadian dollars (roughly 700 million shekels). The company has also hinted at plans to upgrade to a more senior stock exchange in Canada or the U.S. within the next six months, a move that could further enhance its market position.

Beyond Oil has gained attention in the U.S. due to the involvement of its president, Laurel Eastman, a former senior advisor to President Donald Trump. Eastman has publicly committed to advocating for regulations that would make Beyond Oil’s technology a mandatory standard in restaurants, schools, and military sites across the U.S.

Image credit: Foodtech. (Photo: Shutterstock)

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Assaf Rappaport and his dog. (Credit: Nathaniel Tobias)

The previous round of negotiations reportedly collapsed when Wiz turned down a $23 billion acquisition offer from Google. Assaf Rapaport, Wiz’s CEO, explained at a TechCrunch conference that the company had opted to pursue an IPO instead, believing in its potential to surpass a $100 billion valuation. However, industry insiders suggest that regulatory concerns may have played a significant role in Wiz’s hesitation.

At the time, the regulatory landscape was heavily influenced by the Biden administration and the leadership of Lina Khan at the U.S. Federal Trade Commission (FTC). The FTC had been closely scrutinizing big tech mergers, leading to prolonged approval processes and, in some cases, outright cancellations. The failed acquisition of Israeli automotive chipmaker Autotalks by Qualcomm and the delayed Run:ai acquisition exemplified the regulatory roadblocks companies were facing. Wiz may have feared that tying itself to Google could result in a long, uncertain wait for regulatory approval, potentially harming its brand and business momentum.

Fast forward eight months, and the landscape has shifted. With the new Trump administration in place, Google appears more optimistic about its chances of securing regulatory approval. Trump replaced Lina Khan with Andrew Ferguson, a known hawkish voice on antitrust issues, but one who may take a more business-friendly approach than his predecessor.

Beyond the financial magnitude of the deal, Google’s renewed pursuit of Wiz signals its strategic intent to strengthen its position in the cybersecurity sector. While Google dominates in search and cloud computing, it lags behind competitors like Microsoft in cybersecurity services. Acquiring Wiz could provide Google with a critical edge, enhancing its enterprise security offerings and bolstering its presence in a market projected to grow exponentially in the coming years.

For Wiz, a Google acquisition could provide vast resources to scale its operations globally and accelerate product innovation. However, there remains the question of whether Wiz will ultimately accept the offer or once again pursue an independent path toward an IPO. The decision will likely hinge on an assessment of market conditions, regulatory risk, and long-term growth potential.

Main image credit: Founders of Wiz from left to right: VP Product Yinon Costica, CEO Assaf Rappaport, CTO Ami Luttwak, and VP R&D Roy Reznik. (Avishag Shaar-Yashuv)

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A major factor behind this increase was a sharp rise in revenues from information distribution and connectivity services, which grew by 24% to 23.1 million shekels. This was largely due to higher demand for the exchange’s indices and adjustments to usage fees. Clearing services also saw significant growth, with revenues climbing 25% to 26 million shekels, following expanded services for exchange members and regulatory updates for off-exchange transactions. Trading commissions increased by 5%, generating 43 million shekels, while company registration and annual listing fees rose 11% to 22.3 million shekels.

Image credit: TASE in Tel Aviv (Reuters)

The strong momentum continued into the fourth quarter, where revenues increased by 14% compared to the same period in 2023, reaching 115 million shekels. Net profit for the quarter followed the full-year trend, rising 22% to 25 million shekels.

In January 2024, TASE took a significant step by repurchasing 4.6 million of its shares, representing 4.8% of total share capital, from the hedge fund Manikay Partners for 202 million shekels. To fund the transaction, the exchange secured a 130 million shekel loan, repaid a previous 100 million shekel loan, and distributed dividends through a subsidiary.

With increasing market activity, expanding services, and a growing demand for financial data, the Tel Aviv Stock Exchange appears well-positioned for continued profitability in the near term.

Image credit: Freepik

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Like Hapoalim, Leumi announced it would distribute 40% of its annual profit as dividends. The bank’s fourth-quarter net profit reached NIS 2.5 billion, reinforcing its strong financial standing.

Leumi’s impressive performance was fuelled by rising interest income and a sharp decline in provisions for credit losses. The bank’s net interest income climbed 3.2% year-over-year to NIS 16.5 billion, bolstered by high interest rates. At the same time, provisions for credit losses plummeted by 70% to NIS 713 million, following a spike in 2023 due to increased risk assessments mandated by the Bank of Israel amid the war.

Market analysts had anticipated strong results, but the bank exceeded expectations. IBI’s research director, Liran Lublin, had projected a fourth-quarter return on equity of 14.6%, but Leumi outperformed with a ROE of 16.2% in the quarter and nearly 17% for the full year. The unexpected boost stemmed from strong non-interest financing income and lower-than-expected tax expenses, as the bank met its annual war tax obligations sooner than expected.

However, not all financial indicators were positive. Leumi incurred a NIS 600 million impairment charge related to its holdings in the U.S.-based Valley Bank, though this was a reduction from the previous year’s provisions.

For the first time, Leumi outlined ambitious financial targets for the next two years, following a similar move by Hapoalim. The bank expects annual net profits to range between NIS 9 billion and NIS 11 billion in 2025 and 2026, with an ROE between 15% and 16%. While this marks a slight decline from 2024 levels, it remains significantly higher than the 13.7% recorded in 2023 before adjustments for credit losses.

Both banks project continued high profitability despite expectations of declining interest rates and inflation. Leumi anticipates interest rates to drop to a range of 3.7%–4.25% by the end of 2026, down from the current 4.5%. Inflation is expected to moderate to 2.5%–3%, compared to the current annual rate of 3.8%.

A notable development in Israel’s banking sector is the shift toward increased transparency in financial forecasting. Market sources suggest that Leumi’s decision to publish multi-year earnings projections stems from a growing influence of foreign investors. European investors reduced their holdings in Leumi at the onset of the war, and U.S. investors, accustomed to forward-looking guidance, have taken their place. Similar trends appear to be at play at Bank Hapoalim, which recently published an investor presentation in English on the stock exchange website.

Despite record profits, the Bank of Israel is closely monitoring the banking sector’s exposure to the real estate market. Leumi’s mortgage portfolio grew by 11% in 2024, reaching NIS 147 billion, compared to 6.4% growth at Hapoalim.

Loans with a loan-to-value (LTV) ratio above 60% accounted for 44% of Leumi’s mortgage issuances last year, totalling NIS 12.9 billion. This high-leverage lending is particularly relevant to first-time homebuyers, who are eligible for mortgages covering up to 75% of a property’s value.

Image credit: Bank Leumi, Tel-Aviv. (REUTERS Corinna Kern)

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Despite the ongoing price appreciation, the housing sector faces significant headwinds in 2025. Recent reports indicate that real estate firms and their financial backers are reassessing their positions as they navigate a challenging economic environment. Rising supply, shifting buyer sentiment, and financial pressures are among the factors shaping the current market dynamics.

One of the primary concerns is the record-high supply of new apartments. The housing stock has reached approximately 76,000 units, a consequence of the real estate boom in 2021 that spurred large-scale construction projects now reaching completion. However, demand remains moderate, creating an imbalance that puts developers in a precarious position.

Unlike in previous market cycles, many projects cannot be delayed due to contractual obligations. Government-backed affordable housing schemes and urban renewal initiatives require developers to proceed with construction regardless of market conditions. The CBS report highlights this trend, showing a 90% surge in new home sales in December, yet building permits soared even more dramatically by 130%, adding 4,000 additional housing units to an already saturated market.

To counter rising borrowing costs, developers have increasingly relied on financing incentives such as the 20-80 payment plan, where buyers pay only 20% upfront and the remaining balance upon project completion. This model gained traction in 2023 but reached its peak in 2024, with nearly 50% of new home sales utilizing such schemes. However, financial reports indicate that these incentives are losing their appeal, with developers now offering even more lenient plans, such as 15-85 payment structures. Despite these efforts, buyer interest in new homes has declined in the latter half of 2024.

Monthly home sales have been falling at an average rate of 5%, reflecting a broader market slowdown. Even December, which saw a notable uptick in transactions (5,900 homes sold), failed to reverse the trend. This suggests that developers and banks may need to introduce additional measures to attract buyers in 2025.

At the same time, construction costs continue to rise, further squeezing profit margins. The CBS construction input index increased by 2.6% in January alone, bringing the total annual rise to 5.3%. The primary driver behind this surge is higher labour costs due to a shortage of approximately 100,000 Palestinian construction workers since the onset of the recent conflict.

Previously, developers could offset rising costs by linking home prices to the construction input index. However, regulatory changes implemented in mid-2022 now limit this linkage to only 40% of a home’s price, forcing developers to absorb a larger share of cost increases. Some companies have even opted to waive price indexation altogether in promotional campaigns, further eroding profitability.

As a result of these factors, real estate firms are facing financial strain. Data from the Bank of Israel indicates that publicly traded construction companies reported an average profit margin of just 2% in 2024, a stark contrast to the 14% margins recorded three years prior. Some developers are even absorbing part of the recent VAT hike on new home prices to maintain sales momentum.

While the market remains in flux, the coming months will be crucial in determining how developers, banks, and policymakers adapt to these evolving challenges. With a surplus of housing, rising costs, and cooling demand, Israel’s property sector will have to make decisive changes in order to maintain its profitability.

<p>The post Israel’s Property Market: Is It a Good Time to Buy? first appeared on Isranomics.</p>

In December, DeepSeek unveiled its groundbreaking language model, V3, which is open-source and freely available. What sets this achievement apart is its affordability: the model was built in just two months at a cost of less than $6 million. By contrast, major players such as Google and Anthropic have spent hundreds of millions of dollars to develop and train their models, with future investments projected in the billions.

DeepSeek achieved this feat using only 2,000 Nvidia H800 chips, significantly fewer than the supercomputers employed by competitors, which often require over 16,000 chips. This innovative approach has not only reduced costs but also showcased how AI development can thrive without the most advanced and expensive hardware.

DeepSeek’s V3 model has proven itself in several benchmark tests, where it outperformed Meta’s Llama 3.1, OpenAI’s GPT-4o, and Anthropic’s Claude 3.5 in solving complex problems, including mathematics and coding challenges. These results have challenged the long-standing belief that the US holds an unassailable lead in artificial intelligence.

Microsoft CEO Satya Nadella acknowledged the significance of this development, stating, “We need to take the developments from China very, very seriously.” This sentiment reflects a growing awareness of the competitive edge that Chinese companies like DeepSeek are gaining in the global AI race.

The rise of DeepSeek is particularly noteworthy in the context of US-imposed export restrictions on high-powered chips to China. These restrictions, intended to curb China’s technological progress, appear to have had the opposite effect. By necessity, Chinese developers like DeepSeek have innovated around these limitations, finding ways to achieve high performance with less advanced technology.

This adaptability highlights China’s resourcefulness and its ability to circumvent barriers that were expected to hinder its AI advancements. The success of DeepSeek underscores that necessity often drives innovation, a lesson that Silicon Valley is now grappling with as it reevaluates its assumptions about China’s technological capabilities.

While details about DeepSeek remain sparse, reports suggest that the company was founded by Liang Wenfeng and originated from High-Flyer Quant, a Chinese hedge fund managing $8 billion in assets. The startup’s achievements have not only put it on the map but have also sparked excitement and intrigue across Silicon Valley and the global AI community.

The unveiling of DeepSeek’s V3 model has had immediate ripple effects. On Monday morning, futures on Wall Street showed sharp declines, with the Nasdaq dropping by 2% and Nvidia shares falling by 5%. This comes on top of a 3% decline in Nvidia’s stock last Friday. The disruption caused by DeepSeek has introduced new uncertainties in the market, further emphasizing the global impact of the startup’s achievements.

Image credit: FT montage/Getty/Bloomberg

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The MRSAM systems, a customized version of Israel’s Barak 8 air defense system, offer protection against a range of aerial threats. Equipped with advanced phased-array radar, command-and-control systems, mobile launchers, and interceptors featuring cutting-edge radio frequency sensors, the system can track over 1,000 threats simultaneously within a range of 70 kilometers.

The deal aligns with Indian Prime Minister Narendra Modi’s “Made in India” policy, which emphasizes local production and job creation. Reports suggest the contract will generate around 350,000 workdays, reinforcing the country’s push for self-reliance in defense manufacturing. IAI’s subsidiary, Aerospace Services India (ASI), based in New Delhi, oversees the MRSAM program in India, conducting transactions in the local currency and ensuring seamless collaboration.

Meanwhile, Elbit America, a subsidiary of Israel’s Elbit Systems, has announced a $139 million contract to continue producing “Google-Binocular” (ENVG-B) night vision devices for the U.S. Army. The devices, known for their ability to operate effectively in low-light and no-light conditions, will be manufactured at Elbit’s facility in Roanoke, Virginia, with deliveries extending through December 2026.

Since 2020, Elbit America has delivered over 25,000 ENVG-B units, which enhance soldiers’ situational awareness in extreme weather and challenging visibility. Eric Fox, Vice President of Combat Systems at Elbit America, emphasized the value these devices bring to soldiers, allowing them to perform critical missions regardless of environmental conditions.

Another notable development comes from Plasan Sasa, an Israeli company near the Lebanese border, which is deepening its collaboration with South Korean defense giant Hanwha. The partnership focuses on developing protection systems for Hanwha’s K9 Thunder cannons and K10 vehicles, with Romania as a primary target market. Romania recently finalized a $1 billion deal with Hanwha for protection kits for 54 K9 cannons and 36 K10 vehicles, which are NATO-standard artillery systems known for their impressive range of 360 kilometers.

This partnership, initiated in 2022, initially involved protective solutions for Australian military equipment, including Huntsman AS9 cannons and Redback armoured personnel carriers. Despite damage to its factory during the Iron Sword War, Plasan Sasa has continued to innovate, launching the Top Attack Protection System (TAPS) last year. Designed to safeguard vehicles from aerial threats such as drones, TAPS is a lightweight addition to existing defences and has undergone successful testing with Western armies.

Image credit: Defense Update

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