Dollar Surges Worldwide, Including in Israel: How We'll Feel It in Our Pockets

U.S. Federal Reserve interest rate decisions, alongside concerns about military escalation with Iran and rising oil prices, have sent the dollar to record highs and could trigger a wave of price increases for importers in Israel.

U.S. Federal Reserve interest rate decisions, alongside growing concerns about military escalation with Iran and rising oil prices, have sent the U.S. dollar to record highs. The shekel has remained relatively stable, but the strengthening of the currency globally and rising energy prices are expected to trigger a wave of price increases for Israeli importers, from food and electronics to vacations and fuel. Israel imports a significant portion of raw materials, food, electronics, consumer goods and vehicles in dollars or currencies pegged to it, and rising oil prices also increase maritime and air shipping costs, which pass the expenses on to importers and manufacturers.

According to reports, although the Bank of Israel has recently enjoyed restrained inflation within its stability target, rising imports of raw materials and fuel could reignite the consumer price index. If international pressures translate into sustained increases in essential goods, the Bank of Israel may slow or halt planned interest rate reductions, which would keep credit costs high and burden mortgage holders and small businesses.

Electronics and computer products priced in dollars are expected to become more expensive first, along with new vehicles and spare parts. The tourism and aviation sector is expected to suffer double damage: rising jet fuel prices increase flight operations costs, while booking vacations and hotels abroad in foreign currency becomes more expensive for Israeli consumers.

In the short term, some large importers hold inventory purchased at lower exchange rates and shipping costs, allowing them to absorb fluctuations for several weeks, but when the global trend appears sustained, importers tend to update price lists early to prevent losses. According to reports, prices that tend to rise quickly in response to increases in raw material or currency costs are not quick to fall back down even when markets calm, and if the Fed raises rates again in October and tensions in the Gulf continue to drive up oil prices, pressure on importers to raise prices will intensify.