From the Trading Desk: The Shekel's Wartime Resilience

I've been trading currencies for over two decades, and I've watched the shekel navigate wars, political crises, and global recessions.  This month, with Israel and the US engaged in open conflict with Iran, I find myself making the same observation I always do — this country, and this currency, are more resilient than anyone gives them credit for. Here's what the numbers are telling us in March 2026. 

When the United States and Israel launched joint strikes on Iran on 28 February 2026, most currency analysts braced for the inevitable — a sharp shekel selloff, capital flight, and the kind of volatility that typically accompanies open conflict in the Middle East. What actually happened was far more interesting, and for anyone sending money to Israel right now, it carries real practical implications.

A Currency That Defied the Script 

In the weeks leading up to the conflict, the shekel had been on a remarkable run, hitting a 30-year high against the dollar on 12 February, trading at just 3.0680 to the dollar — its strongest level since 1995. In the first two weeks of 2026 alone, the shekel strengthened 1.6% against the dollar, even as tensions over a potential US attack on Iran were mounting.

Then came February 28. And the shekel barely moved.

The shekel initially fluctuated after the strikes but stayed within its recent trading range of 3.09 to 3.23 per dollar. By mid-March, the Bank of Israel's representative rate stood at 3.1140 to the dollar — remarkably close to pre-war levels given the scale of the conflict unfolding across the region.

Why Isn't the Shekel Collapsing?

This is the question I've been asked more than any other by clients over the past three weeks, and the answer lies in a combination of structural strength and market psychology.

Markets absorbed the effects of the war before it occurred. Investors in Israel anticipated the outbreak of hostilities based on available signals, meaning the exchange rate had already priced in much of the risk before the first strike landed. By the time the bombs fell, much of the volatility was already behind us.

Beyond the timing, Israel's economic fundamentals are simply too strong to be easily shaken. Israel holds foreign exchange reserves of approximately $212.93 billion, and its position as a global technology and cybersecurity hub generates sustained foreign investment and reliable dollar inflows. These are the buffers that matter in a crisis.

The Bank of Israel held interest rates steady at 4% ahead of the conflict, citing geopolitical uncertainty, even as Finance Minister Smotrich argued the shekel's strength and moderating inflation justified cuts. That decision signalled confidence in the currency's stability, and markets responded accordingly.

The Medium-Term Picture

Looking at the USD/ILS pair right now, we are essentially trading in a narrow band between 3.09 and 3.14 — tight, considering what's happening militarily. Analysts are pricing outcomes rather than escalation, with the expectation that weakening Iran structurally benefits Israel in the medium and long term, reducing its strategic risk premium.

The Bank of Israel attributed the shekel's 6% appreciation against the dollar in the second half of 2025 to a decline in Israel's risk premium following the Twelve-Day War in June and the Gaza ceasefire in October. The same logic is being applied today — if this conflict results in a significantly diminished Iranian threat, the shekel's longer-term trajectory could strengthen further.

That said, this is not a one-way trade. Unlike June 2025's Twelve-Day War, the current conflict has no clear diplomatic off-ramp. Iran has widened its retaliation across the region, the Strait of Hormuz remains disrupted, and Brent crude has pushed past $100 a barrel. A prolonged war of attrition, or a significant escalation on Israeli soil, would change the currency calculus quickly.

For those watching the GBP/ILS and EUR/ILS pairs specifically, the picture is similarly nuanced. Sterling and the euro have both held reasonably firm against the shekel during the conflict, with the same underlying dynamic at play — a structurally strong Israeli economy absorbing geopolitical shock better than most anticipated.

What the currency charts cannot capture is the human story behind the numbers. Israelis are, once again, living between moments of normalcy and the reality of spending numerous times per day in bomb shelters. The resilience of this country and its people is, frankly, extraordinary. Life continues, businesses operate, families carry on. That spirit is not unrelated to why the shekel holds its value when others might expect it to collapse.

At IsraTransfer, our team is here through all of it — many of us living that same reality. Whether you are buying property from the US, the UK, or anywhere in Europe, transferring funds, or simply trying to understand what the current environment means for your finances, we are always here for a conversation. No obligation, no pressure — just people who understand both the market and what it means to be connected to this remarkable country. Reach out to us any time. Am Yisrael Chai.