New blow to Israelis' wallets - the dollar is preparing a surprise

A stronger dollar and rising oil prices create risks for the Israeli economy: a weaker shekel, more expensive imports and continued high interest rates. The DXY dollar index rose to 102.39 points, approaching a one-and-a-half-year high. Brent crude rose 2.09% to $106.80 a barrel. The combination could complicate rate cuts by the Bank of Israel and hit mortgage holders.

A stronger dollar and rising oil prices are creating new economic risks for Israel. The DXY dollar index rose 0.16% to 102.39 points, approaching a one-and-a-half-year high. Over three weeks, the volume of positions betting on a stronger dollar grew from 8.4 to about 36 billion dollars. Brent crude rose 2.09% to $106.80 a barrel, roughly 45% above its level before the US-Israeli war against Iran began. Houthi attacks on Saudi Arabia and oil tankers add further pressure. For Israel, the combination of expensive oil and a strong dollar threatens a weaker shekel, more expensive imported goods (fuel, electronics, cars) and stronger inflation. Markets put the probability of the Fed holding rates steady at 81%, which would support the dollar. This complicates any easing of monetary policy by the Bank of Israel. Israelis with mortgages, whose payments depend on changes in interest rates, will feel the effects first. The shekel's further trajectory will depend on Fed decisions, the security situation and the state of the Israeli economy.