Lion's labor market fracture. Postal bank rising? Bonds defy $120 oil.

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Lion's labor market fracture. Postal bank rising? Bonds defy $120 oil.

Today in Israel - and what it all means for the business community at home and abroad.

Sophia Tupolev

Apr 13, 2026

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Quick takes:

Macro: Job seekers spiked 18% in a single week; The Bank of Israel’s foreign exchange reserves dipped to $228.27 billion; The Israel Tax Authority is officially widening 2026 income tax brackets to offset inflation.
Capital Markets: The local bond market demonstrated remarkable resilience amid the Iran conflict; Kornit Digital acquires Dutch software firm PrintFactory; Israel Post taps former El Al executive Ronen Galperin to lead its financial arm.

Macro

Employment Bureau in Jerusalem | Photo: Yossi Zamir, Flash90

The macroeconomic toll of Operation Roaring Lion is coming into sharp focus. The Ministry of Finance estimates the direct fiscal cost of the conflict at ₪35 billion, with the defense establishment eating up roughly ₪22 billion of that total for immediate operational costs, munitions, and reserve mobilization.

The kinetic phase might be triggering an immediate labor shock. The Employment Service reported an 18% weekly surge in job seekers, pushing the national total to 359,533. Most alarming is the 41.3% jump in workers placed on unpaid leave (Chalat), adding nearly 48,000 furloughed employees in a matter of days to reach a total of 164,210.

Our Take: The sheer velocity of the labor market’s contraction exposes the extreme fragility of Israel’s wartime civilian economy. While the Ministry of Finance trumpets its ₪12 billion business compensation and furlough packages as a stabilizing force, a 41% spike in furloughed workers in a single week is not a sign of resilience, it is a glaring signal that small and medium enterprises (SMEs) are pulling the emergency brake on payrolls. The state is essentially socializing the cost of private-sector paralysis, absorbing tens of thousands of salaries onto the public balance sheet at a time when the military is burning through nearly ₪1 billion a day.

The Bank of Israel reported a $6.27 billion drop in its foreign exchange reserves for March, bringing the total down to $228.27 billion. According to the central bank, the vast majority of this decline was driven by downward asset revaluation in global markets, which was partially offset by government foreign exchange activities. Despite the drop, reserves remain at a historically robust 37.2% of GDP.

In a parallel move to ease the domestic squeeze, the Israel Tax Authority announced the official widening of the 2026 income tax brackets. This fiscal adjustment is designed to offset inflation, effectively increasing the net pay for middle and upper middle class wage earners (specifically those earning over ₪193,800 annually) by ensuring that nominal wage increases meant to match inflation do not push workers into higher tax brackets.

Our take: On the monetary front, the Bank of Israel’s FX reserves remain a formidable, sovereign fortress. For foreign investors, the $6.3 billion March contraction should not be misread as capital flight. It was primarily a paper loss driven by global market revaluations. The fact that the BOI maintains a war chest equivalent to 37% of the national GDP proves the central bank still has immense, untapped firepower to defend the shekel and ensure systemic dollar liquidity if regional geopolitical friction reignites.
However, the juxtaposition of the ₪35 billion deficit injection against the Tax Authority’s bracket widening highlights a severe structural paradox. The government is aggressively bleeding capital to fight a multi-front war and bail out frozen businesses, while simultaneously reducing its effective income tax yield to throw a lifeline to a middle class drowning in inflation. The math simply does not align. This fiscal tightrope walk points to a severe deficit breach later in 2026, which will inevitably force the Treasury to issue a massive wave of new government debt, crowding out private investment just when the economy needs it most.

Capital Markets

Despite the outbreak of the direct Iran conflict, the temporary closure of the Strait of Hormuz, and a brief global spike in oil prices to $120 a barrel, the local bond market demonstrated remarkable resilience. Shekel-denominated short term government bonds actually saw slight gains of up to 0.3%, defying expectations of a severe, risk off sell-off.

Variable-rate corporate bonds also rose up to 1%, supported by shifting interest rate expectations. Analysts at Migdal Capital Markets note that the consensus for Bank of Israel rate cuts has been pushed back significantly, with markets now pricing in a hold until at least August, aiming for a 3.5% rate by year-end. Long-term government bonds, however, took a hit, falling 1.7% as yield curves adjusted to the long-term inflationary reality.

Our take: The Israeli bond market is currently exposing a sharp divergence between short-term institutional buffering and long-term macroeconomic reality. While local pension funds swooped in to buy the short-term dip, acting as a massive shock absorber against geopolitical panic, the 1.7% drop in long-term government bonds tells the real story. The yield curve is actively adjusting to price in the higher for longer inflation premium triggered by $120 oil and supply chain chokes in the Strait of Hormuz. With Bank of Israel rate cuts pushed back to at least August, the cost of capital will remain restrictively high, meaning highly leveraged real estate developers and corporate borrowers are staring down a brutal refinancing wall in H2 2026.

Ronen Galperin, CEO of Israel Post Finance | Photo: Ohad Romano

A major executive shakeup may point to a shift in the local financial sector. Israel Post, recently privatized under the ownership of the Milgam consortium, has appointed Ronen Galperin as the new CEO of Postal Finance, its financial arm. Galperin previously served as the CEO of El Al’s frequent flyer program, where he managed the highly lucrative FlyCard credit operation, generating ₪170 million in net profit and driving the subsidiary’s valuation to roughly ₪2.7 billion.

Our take: The executive shakeup at Israel Post could potentially be a blinking red warning light to the domestic banking sector. Under Milgam’s new private ownership, the Post could leverage its sprawling physical retail footprint and vast customer database into a high-margin fintech operation.
By poaching Ronen Galperin, the architect who built El Al’s FlyCard into a ₪2.7 billion consumer credit juggernaut, Milgam is signaling its intent to bypass legacy banking. Sounds like more than a modernization of the national mail service - possibly the groundwork for a bank poised to launch a highly competitive assault on consumer credit margins.