Israeli strikes hit Arab stock markets

Egyptian shares have fallen substantially

Middle East stock markets went into reverse on Tuesday as an escalation of Israeli military action in the region dented already weak investor confidence.

Leading Egyptian shares lost 3.2% while the Al-Quds index of Palestinian shares continued to spiral lower, shedding a further 1.2%.

Most Palestinian stocks - traded in Nablus and quoted in US dollars or Jordanian dinars - have lost ground steadily since the start of a Palestinian uprising last year against Israeli occupation.

Last week, the Al-Quds index dipped 2.2% to be - at 25% down on the year - the worst performer among Arab stock markets in 2001.

Bakheet Financial Advisers of Saudi Arabia said this was because of "Israel's continued economic attacks on the Palestinian economy".

Panic

The falls in Egyptian share prices were prompted mainly by the Israeli military attacks on Lebanon on Monday, said Yasser el-Masry, head of trading at El Eman Securities in Cairo.

"They have caused panic."

Israeli shares were not immune to the fall-out from the violence.

The Tel Aviv 25 index of blue chip shares declined 3.2% on Tuesday, wiping out most of last week's gains, while the tech-dominated Teltech index slipped 3.4%.

On the currency markets, the Israeli shekel lost 0.6% to stand at 4.2020 shekels to the US dollar.

"It was a combination of factors - declines on [the US] Nasdaq, the security situation as well as an overshooting of dollar sales last week that led to a correction upwards," said Zahi Elias of Bank Leumi.

He said shekel traders would continue to focus on the political and military situation in the coming days, with any worsening of the violence likely to send the shekel lower.