When Clouds of War Clear in Israel, Markets May Gain Confidence

Timothy Partners, LTD offers the following assessment of the Israeli market.

ORLANDO, Fla., Oct. 8, 2025 /PRNewswire/ -- When the literal and figurative smoke clears in Gaza, confidence in the region's economic prospects may emerge. It seems that Hamas bit off more than it could chew on October 7, 2023, and whether it accepts Trump's new peace plan or pursues a different endgame, its power in the region appears damaged, possibly even beyond repair.

Wars often drive money away in a panic, but even amid this conflict, the performance of Israel's economy has been remarkable. Questioned on the source of this strength, Israeli Minister of Economic Affairs Noach Hacker responded bluntly in a July interview with the non-partisan Atlantic Council.

"I think we've shown the investors, the world financial markets, that we're very strong, very stable, and we don't only survive wars, we grow through them and we come back on the other side stronger than we were before."

While this is clearly the view of a partisan actor rather than a disinterested spectator, there is history to support the statement. It's a history we have come to appreciate through offering a fund that invests solely in companies either domiciled or incorporated in Israel. In the decades since World War II, this nation—roughly the size of New Jersey and with a population less than half that of the New York City metropolitan area—has consistently emerged from upheavals and become wealthier than before.

The Tel Aviv 125 index, which stood at 1,859 before the October 7th attacks, lost more than 13% of its value in the following weeks. But as of September 30, 2025, the index stood at 3,250, a gain of 75% over pre-war levels. This was no accident. Israel entered the war without the structural problems of much of the developed world. In an age when many wealthy nations grapple with the specter of internal population decline, Israel's demographic trends are strong. And rather than the budget deficits so common in the West, Israel ran a surplus in 2022. Even today, during a very expensive war effort (some estimates place the cost at over $60 billion), its fiscal house remains in enviable shape. The most recent debt-to-GDP ratio stands at 69%. In the United States, that figure is 123%.

In 2024, which included some of the worst days of the conflict, The Economist ranked Israel the world's sixth strongest economy. And in its economic outlook released in June 2025, the Organization for Economic Cooperation and Development (OECD) projected Israel's GDP to grow 5.5% in 2026, a figure that is likely to eclipse most of the developed world, including the United States.

Understanding this macroeconomic strength requires understanding the underlying population, which exhibits not only the skill of thriving amid diversity, but also of entrepreneurship and innovation. This has earned Israel the nickname "Startup Nation." The technology sector accounts for a fifth of Israel's economic output, double the share in the U.S.

And underlying this is a beneficial military-entrepreneurial complex in which mandatory national service funnels citizens into units based on both individual talents and national needs. Many of these people end up starting or working at firms in the defense and technology sectors, exporting world-leading capabilities in fields such as cybersecurity. Furthermore, simply having so many young adults involved in military service builds personal resilience. For Israelis, there is a tolerance for "constructive failure" as the key to innovation. There is something to be learned from failure, they say, if the risk was taken intelligently.

For the past two years, all these factors have together acted as a flywheel on Israel's economic engine, preserving inertia through the conflict. And the cessation of active hostilities may usher in a period when the Israeli economy and its asset markets could be positioned for renewed growth. Helping further power this, proven natural gas reserves have grown 40% in the past decade, and are now enabling the building up of a sovereign wealth fund to channel resource revenue into long-term growth.

Despite this, many investors lack exposure to Israel in their portfolios. Tel Aviv Stock Exchange's Sunday-through-Thursday trading week has prevented its inclusion in some international indices. But that will change in 2026, when the exchange transitions to Monday-through-Friday trading, something that could attract more international capital.

But overshadowing such factors may be a simple fear of geopolitical instability. If that is the case, should the current headwinds of war subside, and especially if a settlement seems lasting, investor sentiment on Israel may benefit.

This is the investment paradox at the heart of Israel's economic history of "making the desert bloom," as the slogan says. Harsh surroundings create conflict and volatility, which resilience can convert into opportunity, although past resilience does not guarantee future performance, and investors should remain aware of ongoing geopolitical risks.

Timothy Partners, LTD is the administrator for Timothy Plan family of funds. Timothy Plan, located in Orlando, Florida, is a pioneer in the Biblically Responsible Investment movement, celebrating 31 years in business with more than $2.85 billion in assets under management.

To interview Timothy Plan President, Brian Mumbert or another representative, contact [email protected], Kim Billips, 407/644-1986.

Investing involves risks, and potential loss of principal. Please consider carefully the investment objectives, risks, charges and expenses of the Timothy Plan mutual funds by reading the prospectus.  It is available online at mf.timothyplan.com for the mutual funds, or you may call 800-846-7526 to receive a print copy. Be sure to read the prospectus carefully.  

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Strategies intended to hedge risk may be partly or wholly unsuccessful. Because the Timothy Plan Funds do not invest in excluded securities, the Funds may be riskier than other funds that invest in a broader array of securities. There are risks when a fund limits its investments to particular-sized companies, and all companies are subject to market risk.

Israel Common Values --- A: TPAIX C: TPCIX I: TICIX
INTERNATIONAL MUTUAL FUNDS, compared to domestic funds, have added risk from currency fluctuations and exchange risks, a more relaxed regulatory environment, more rapid and extreme changes in value due to smaller market sizes, or possible adverse political activities. Investment portfolios that are limited to specific geographic regions or countries may also increase the risk of loss, as does limiting the number of companies available for investing. Emerging markets or emerging economies are nations with social or business activity in the process of rapid growth and/or industrialization.

TA-125 Index is TASE's most significant index and considered as the Israel Economy Benchmark Index. TA-125 financial products are the most popular among TASE Indices. The index consists the 125 shares with the highest market capitalization that are included in the TA-35 and TA-90 indices. The Tel Aviv 125 Index is a market index and is not directly linked to the performance of the Timothy Plan Israel fund. Past performance of an index is not indicative of future results of any specific investment product

SOURCE Timothy Plan