Peace in the Middle East? Israeli stocks advance on new Gaza plan

Alex Wong/Getty Images News

Stocks on the Tel Aviv Exchange continue to rise following the newly published 20-point plan [https://www.pbs.org/newshour/politics/read-trumps-20-point-proposal-to-end-the-war-in-gaza] to end the war in Gaza. The proposal was unveiled at the White House by President Trump and Israeli Prime Minister Bibi Netanyahu, with leaders of the Arab and Muslim world subsequently applauding the roadmap. Final approval is now up to the terror group Hamas, which is currently meeting with Qatari and Egyptian negotiators in Doha.

_Bigger picture_: Israeli shares have heavily outpaced their counterparts in the U.S. over the past year, in line with a broad outperformance of international stocks [https://seekingalpha.com/news/4494354-time-to-diversify-international-stocks-heavily-outperform-the-u-s-in-2025]. Since October 10, 2023, the first trading day after the October 7th massacre, the total return of the iShares MSCI Israel ETF (NYSEARCA:EIS [https://seekingalpha.com/symbol/EIS]) has been 95%, compared to 54% for S&P 500 ETFs. Investors appear to be pricing in a long-term stable environment in Israel once the current war comes to an end, with optimism for economic growth and a reduction in security threats.

"I'm not just talking about Gaza. Gaza is one thing, but we’re talking about much beyond Gaza. The whole deal, everything getting solved. It's called peace in the Middle East," President Trump said during a press conference that didn't feature any questions from reporters. "The Abraham Accords are amazing. I think this will also lead to packing them. The promise of a new Middle East is so clearly within our reach. So now it's time for Hamas to accept the terms of the plan that we've put forward today."

WILL IT WORK? Israel's past peace treaties with Egypt and Jordan were more focused on existing borders and security, while its recent normalization with the UAE, Bahrain, Morroco and Sudan opened the door for diplomacy and economic relationships. Talks with Syria, Saudi Arabia, and others also have potential, given shared strategic interests. However, it will be infinitely harder to ink any long-lasting arrangement with the Palestinians, given a zero-sum conflict over the same territory, as well as final status issues that challenge each other's national, historic, religious, and existential claims.

_DEAR READERS:_ We recognize that politics often intersect with the financial news of the day, so we invite you to click here [https://seekingalpha.com/article/4818415-politics-and-the-markets-093025] to join the separate political discussion.

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