Behind the Super Shekel: Why Israel's Currency is Holding Strong

Yael Simon
Jul 30
7 min read

Jon Simmons 🎗️

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In the wake of war, currencies typically fall. Confidence is shaken, capital flees, and the value of money tumbles in tandem with stability. But Israel’s currency is telling a different story.

After a sharp two-week rally, the Israeli Shekel (ILS) reached ₪3.3312 per USD on 12 July 2025, its strongest position in over two years. Over the past month alone, the shekel has appreciated by 6.53%, and it is up 8% year-on-year. In the context of a military conflict with Iran just weeks earlier, this performance is not only remarkable, it is virtually unprecedented.

This raises the question: What is behind the strength of the Shekel?

A Currency That Defies Geopolitical Gravity

Israel’s neighbourhood is no stranger to conflict. From Gaza to Tehran, the region has seen frequent and prolonged instability. Unlike other currencies in conflict zones, such as the Syrian Pound, Lebanese Lira or Ukrainian Hryvnia, which collapsed under the weight of war, the Shekel has held firm and even strengthened.

This resilience is not coincidental. It is the result of systematic planning, diversified economic foundations, and the global integration of Israel’s high-tech ecosystem, much of which I've covered, and will continue to cover, in the Invest in Israel Tech Newsletter

As Yael Simon, Founder of the Amplify Investor Summit, explains:

“The 12-day Israel-Iran conflict that concluded last week wasn't just another geopolitical episode—it was the latest in a series of stress tests that reveal something institutional investors are beginning to recognise: Israeli economic resilience isn't circumstantial luck, it's systematic design. While markets globally have learned to price in 'tail risks' and 'black swan events,' Israeli assets demonstrate a different pattern entirely. Rather than simply recovering from crises, they often strengthen during them. This counter-intuitive performance suggests institutional investors may be systematically underestimating an economy engineered for adversity.”

Powered by Tech

At the heart of Israel’s economic strength is a tech sector that continues to attract significant global investment. In July 2025, Nvidia confirmed plans for a multibillion-dollar artificial intelligence technology park in northern Israel. The project is expected to become the country’s largest technology campus and to create thousands of new jobs.

The move follows Nvidia’s earlier acquisition of Mellanox and its development of Israel-1, the nation’s most powerful AI supercomputer. Since 2020, Nvidia’s workforce in Israel has tripled, now employing 5,000 people.

Dror Bin, CEO of the Israel Innovation Authority, remarked: “This is a huge investment. Choosing Israel is of great significance and shows confidence in Israel’s high-tech ecosystem.”

Nvidia is not alone. Global tech leaders such as Google, Meta, Amazon, Oracle and Tesla continue to expand their Israeli operations. While Intel recently laid off hundreds of Israeli employees, Nvidia and others are rapidly scaling up.

Oracle CEO Safra Catz stated that “some of the best people in the world are here in Israel, and there's no question about that.” She added that Israel’s proven ability to produce the brightest minds and best problem solvers will ensure capital keeps flowing, particularly during the current global AI boom.

A Macroeconomic Backbone

Israel’s economic fundamentals are supporting the Shekel’s strength. The country holds over $200 billion in foreign exchange reserves. Inflation is easing, with forecasts showing 2.7% for 2025, within the central bank’s target range. Interest rates remain at 4.5%, although the Bank of Israel may reduce them later this year to support growth.

The national budget deficit is projected at 4.3% of GDP, even with increased military expenditure. Moody’s expects Israel’s economy to grow by 2.0% in 2025 and 4.5% in 2026, while the Bank of Israel projects 3.3% and 4.6% for those same years.

Foreign direct investment is robust. Israel ranked 12th globally in FDI inflows and has accumulated a stock of $236 billion, equivalent to almost 49% of GDP.

Evan Liberman, CEO of Wise Money Israel, highlights how global investors are reassessing Israel’s risk profile.

“Large financial institutions around the world are recalibrating the risk premium that Israel used to have, recognising the balance of power in the Middle East has shifted dramatically as a result of the IDF successes in this war. We see the Shekel strengthening about 8% over the past few weeks as Israel regained its deterrence against Iran, and the trend of a strengthening Shekel will likely continue as further regional developments occur, and the war begins to end.”

Markets That Rally in Crisis

During the conflict with Iran, Israel’s TA-125 Index defied the expectations of many and rose.

This reflected investor confidence not only in the currency but in the broader market. Historically, Israel’s markets have rallied during or immediately after crises. After the COVID-19 pandemic, the tech sector expanded significantly. During previous military conflicts, defence tech breakthroughs became commercialised at scale.

In her article, What If Crisis Creates Alpha, Yael wrote: “ Israeli GDP growth accelerated after major crises rather than simply recovering to previous levels. The tech sector expanded during COVID-19. Military conflicts often coincide with innovation breakthroughs that drive long-term competitive advantages.”

Innovation at the Front Line

One of the defining trends of 2025 is the blurring of lines between commercial innovation and national security. Israeli startups are no longer waiting for government contracts or long procurement cycles. They are building and deploying solutions directly with military end-users.

Lital Leshem, Co-Founder of Protego Ventures, renowned for investing in founders driving change through technologies that scale internationally, said;

“Israel’s startup ecosystem has always thrived on urgency, but today that urgency is driving a fundamental realignment. The line between commercial tech and national security is rapidly disappearing. Startups that once focused on enterprise SaaS, mobility, or fintech are now channelling their capabilities toward applications, not as a pivot but as a mission, and we’re seeing this shift daily. Founders aren’t waiting for government programs or long procurement cycles. They’re building, testing, and deploying at unprecedented speed, often directly with end-users in defence and homeland security. And it’s not just about Israel. NATO countries and European allies are actively looking to the Israeli ecosystem for defence solutions that can strengthen their defence readiness. The demand for deployable, proven tech is accelerating across borders, and the companies that can deliver are earning a seat at the table. This isn’t just a boom in defence budgets. It’s a deeper transformation of how innovation reaches the front lines with global implications.

Strategic Depth and Future Potential

Israel’s natural gas reserves, estimated at 6.2 trillion cubic feet, offer additional strategic depth. With growing energy exports and trade surpluses, the country’s macroeconomic resilience is further reinforced.

While geopolitical risks remain, particularly in relation to the Palestinian conflict, so far, they have not derailed the Shekel’s momentum. On the contrary, there is renewed discussion around potential normalisation with additional Arab states, which could unlock new regional infrastructure projects, energy deals and economic cooperation.

According to analysts from the Bank of America, the Shekel is well-positioned to be one of the strongest-performing currencies in the coming years, driven by the strength of the tech sector, strong institutional foundations, and favourable investment flows.

The Israeli Shekel has demonstrated remarkable resilience during one of the most challenging periods in recent memory. This is not the result of luck or currency manipulation. It is the reflection of a highly diversified, export-oriented, tech-driven economy with deep strategic reserves and strong institutions.

Israel’s financial system is engineered not just for recovery but for durability in adversity. For global investors seeking stable returns in an unpredictable world, the Shekel is not simply surviving conflict. It is thriving because of the unique innovation and economic structure that lies behind it.

by Jon Simmons - Content Strategist for Investment Funds and Technology Disrupters

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