Israel and Bond Market Buster Bomb: How Europe’s Fury at Washington Spills Over |
The great transatlantic melodrama of 2025 has taken an unexpected turn. Europe — furious that Washington has cut a Ukraine–Russia understanding over its head — is threatening to retaliate not with tanks or tariffs, but with its most potent modern weapon: a coordinated dump of U.S. Treasuries. Yes, the continent that struggles to synchronise train timetables is suddenly contemplating a USD 2.3 trillion financial airstrike on the global reserve currency.
Washington pretends not to notice. Europe practises its indignant glare. Markets do what they always do when grown-ups fight: they panic. And Israel, who wasn’t even present when the argument began, finds itself tallying the cost of the collateral damage.
Because if Europe hurls its Treasury holdings at the market in a fit of geopolitical pique, Israel doesn’t simply catch America’s cold. It absorbs America’s cold, Europe’s flu, and its own regional pneumonia all at once.
Bond-Market Backdraft: Israel as Unwilling Counterparty
A European Treasury-dump would send U.S. yields lurching higher. When U.S. yields rise sharply, every economy benchmarked to the dollar feels the pinch — but Israel, with its deep financial integration and dollar-heavy borrowing structure, feels it acutely.
Government yields climb automatically. Corporate spreads widen. Pension and insurance funds take mark-to-market losses. The shekel weakens in the usual emerging-market way — but Israel is not an emerging market, and so the weakening feels like an affront.
The Bank of Israel, renowned for steady hands and cool heads, suddenly finds itself juggling FX volatility, imported inflation pressure, and a spike in global rates — all while keeping one eye on Gaza, one eye on the northern front, and a third metaphorical eye on domestic politics.
If the global mood turns risk-off, Israeli sovereign CDS widens, the........