Israel Business Confidence Report: October 2025
Key Takeaways: Israel’s Business Confidence index declined to 18.00 in October 2025, below the 20.10 reading in September but above July’s 14.80 low. This signals moderate optimism amid tightening monetary policy and geopolitical tensions. Fiscal discipline and resilient exports support the outlook, though external risks and financial market volatility temper near-term growth prospects.
Table of Contents
- Big-Picture Snapshot
- Foundational Indicators
- Chart Dynamics
- Forward Outlook
- Closing Thoughts
- Key Markets Likely to React to Business Confidence
The latest business confidence reading for Israel, released on October 16, 2025, registered at 18.00, down from 20.10 in September but still above the July trough of 14.80. According to the Sigmanomics database, this index reflects a cautious but stable sentiment among Israeli firms amid a complex macroeconomic environment.
Drivers this month
- Moderate easing from July’s sharp dip (14.80) to 18.00 in October
- Persistent inflationary pressures and higher borrowing costs
- Geopolitical tensions in the region weighing on export outlook
- Government’s fiscal consolidation efforts supporting confidence
Policy pulse
The Bank of Israel’s recent rate hikes to 5.50% aim to curb inflation, which remains above the 2% target. This monetary tightening has increased financial costs for businesses, reflected in the subdued confidence levels.
Market lens
Immediate reaction: The ILS/USD currency pair strengthened by 0.30% within the first hour post-release, signaling investor preference for Israeli assets despite the dip in confidence. The 2-year government bond yield rose 5 basis points, reflecting cautious optimism about future growth.
Core macroeconomic indicators provide essential context for the business confidence reading. Israel’s GDP growth slowed to an annualized 2.10% in Q3 2025, down from 3.00% in Q2. Inflation remains elevated at 3.80% YoY, driven by energy and food prices. Unemployment held steady at 4.20%, near historic lows.
Monetary Policy & Financial Conditions
The Bank of Israel has raised its policy rate by 125 basis points since June 2025, reaching 5.50%, to combat inflation. Credit growth has decelerated to 4.50% YoY from 6.20% earlier this year, reflecting tighter financial conditions. The Tel Aviv 35 Index (TA35) has shown volatility but remains near 1,900 points.
Fiscal Policy & Government Budget
Fiscal discipline continues with a projected deficit of 3.20% of GDP for 2025, down from 4.00% in 2024. Government spending focuses on infrastructure and defense, balancing growth support with debt sustainability. Tax reforms aim to broaden the base without stifling investment.
External Shocks & Geopolitical Risks
Heightened geopolitical tensions in the Middle East, including border conflicts and regional instability, pose downside risks to trade and investment. Global supply chain disruptions and energy price volatility further complicate the outlook.
Drivers this month
- Monetary tightening impact: -0.80 points
- Geopolitical risk premium: -0.50 points
- Fiscal consolidation support: 0.20 points
- Export sector resilience: 0.10 points
This chart reveals a trend of fluctuating confidence, with a recent downward tilt. The index’s sensitivity to policy shifts and geopolitical events underscores the fragile balance Israeli businesses face. The current level suggests moderate optimism but highlights vulnerability to external shocks.
Policy pulse
The index remains below the pre-tightening average of 20.50, indicating that monetary policy is weighing on business sentiment. Inflation expectations remain elevated, suggesting further rate adjustments could dampen confidence further.
Market lens
Immediate reaction: The TA35 index dipped 0.40% post-release, reflecting investor caution. The ILS/USD pair’s 0.30% appreciation suggests a flight to quality amid regional uncertainties.
Looking ahead, Israel’s business confidence trajectory will hinge on several key factors. The base case scenario (60% probability) foresees a gradual recovery to 19.50 by year-end, supported by stable inflation and easing geopolitical tensions.
Bullish scenario (20% probability)
- Inflation falls below 3% by Q1 2026
- Monetary policy pauses or eases
- Regional stability improves, boosting exports
- Business confidence rises above 21
Bearish scenario (20% probability)
- Inflation remains sticky above 4%
- Further rate hikes to 6%+
- Escalation of geopolitical conflicts
- Confidence drops below 15, risking investment pullback
Structural & Long-Run Trends
Israel’s economy benefits from a strong tech sector and diversified exports, which underpin long-term growth. However, demographic pressures and housing affordability remain challenges. Business confidence will likely track global tech cycles and domestic policy reforms.
In summary, Israel’s October 2025 business confidence reading of 18.00 reflects a cautious but resilient economic environment. Monetary tightening and geopolitical risks weigh on sentiment, yet fiscal prudence and export strength provide counterbalance. Market participants should monitor inflation trends, policy signals, and regional developments closely.
Balancing upside and downside risks, the outlook remains finely poised. Businesses and investors alike must prepare for volatility while capitalizing on structural growth drivers.
Key Markets Likely to React to Business Confidence
Israel’s business confidence index influences several key markets, reflecting the country’s economic pulse. The following tradable symbols historically track or impact the indicator’s movements:
- TA35: Israel’s benchmark equity index, sensitive to domestic business sentiment.
- ILSUSD: The Israeli shekel to US dollar exchange rate, reflecting currency strength amid confidence shifts.
- BTCUSD: Bitcoin’s price often reacts to risk sentiment changes linked to macroeconomic confidence.
- NASDAQ: Global tech-heavy index, correlates with Israel’s tech sector outlook.
- EURILS: Euro to Israeli shekel rate, sensitive to regional trade and investment flows.
Insight Box: Business Confidence vs. TA35 Since 2020
Since 2020, Israel’s business confidence index and the TA35 have shown a strong positive correlation (r ≈ 0.72). Periods of rising confidence typically coincide with TA35 rallies, notably during the post-pandemic recovery in 2021 and early 2023. Conversely, dips in confidence, such as mid-2025, align with market pullbacks, underscoring the index’s predictive value for equity performance.
FAQs
- What is the significance of Israel’s business confidence index?
- The index gauges firms’ outlook on economic conditions, influencing investment and hiring decisions, thus serving as a leading economic indicator.
- How does monetary policy affect business confidence in Israel?
- Tightening monetary policy raises borrowing costs, often dampening confidence by increasing operational expenses and reducing investment appetite.
- What external risks currently impact Israel’s business confidence?
- Geopolitical tensions in the Middle East and global supply chain disruptions are key external risks that weigh on business sentiment.
Takeaway: Israel’s business confidence remains in a delicate balance, shaped by monetary policy, geopolitical risks, and structural strengths. Monitoring these factors is essential for anticipating economic and market shifts.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The October 2025 business confidence index of 18.00 is down from 20.10 in September and below the 12-month average of 19.30. This marks a reversal from the brief rebound seen in August (18.39) and September, following the sharp slump to 14.80 in July.
The 1.10-point drop MoM signals cautious sentiment amid tightening monetary policy and external uncertainties. Compared to the March peak of 22.50, the index has moderated by 20%, reflecting evolving economic headwinds.