ETF Spotlight: EIS Under Pressure After Israel Strikes Iran
- Israeli strikes on Iran nuclear facilities add to geopolitical tensions.
- EIS holds $272.6 million in pure Israeli stock exposure.
- The fund tracks a capped benchmark with a 25% single-security limit.
The iShares MSCI Israel ETF (EIS) is in the spotlight after Israel launched widespread strikes against Iran's nuclear facilities Thursday night and Iran mounted a counterattack Friday, adding to geopolitical tensions that could impact Israeli markets.
Israel conducted attacks on 100 targets across Iran, including the main uranium-enrichment facility at Natanz, according to The Guardian. The operation involved 200 Israeli fighter jets and targeted nuclear sites, military installations and the Revolutionary Guard headquarters in Tehran.
EIS in Focus
The strikes put investors' focus on EIS, which offers investors pure exposure to Israeli companies with all holdings traded in Tel Aviv, making it vulnerable to regional conflicts that could affect Israeli equity markets.
EIS holds $272.6 million in assets under management and tracks a market-cap-weighted index of Israeli firms, according to FactSet data. BlackRock Inc. (BLK) manages the fund, which charges a 0.59% expense ratio and caps exposure to any single security at 25%.
The fund's top holdings reflect Israel's economy, with the Bank Leumi Le-Israel at 8.6% and Bank Hapoalim at 7.3%, according to FactSet. Teva Pharmaceutical Industries (TEVA) represents 7.1% of the portfolio, while Check Point Software Technologies (CHKP) comes in at 7%.
The military action comes as Israeli Prime Minister Benjamin Netanyahu said Iran was building nuclear warheads with enough fissile material for nine bombs, justifying the unilateral action, according to The Guardian. The International Atomic Energy Agency confirmed Iran's main nuclear-enrichment facility at Natanz was hit, though damage assessment remains unclear.
Israeli Markets Under Pressure
The strikes killed senior Iranian military leaders, including Revolutionary Guard head Hossein Salami and six nuclear scientists, according to Iranian state media reports cited by The Guardian. Iran responded by firing approximately 100 drones at Israel, with Supreme Leader Ali Khamenei threatening "severe punishment."
The escalating conflict has immediate implications for EIS performance, with the fund down 1.2% in early afternoon trading. EIS has posted a 9.2% return year to date and attracted $36.9 million in net flows this year, according to FactSet. However, the fund experienced $11.9 million in outflows over the past three months, suggesting some investor caution around Israeli exposure.
Among EIS's other major positions, CyberArk Software (CYBR) comprises 6.6% of holdings, while monday.com (MNDY) represents 4.4% of the portfolio, according to FactSet. Defense contractor Elbit Systems (ESLT) holds a 4% weight.
The attacks occurred days before scheduled U.S.-Iranian diplomatic talks in Oman aimed at resolving the nuclear standoff, according to The Guardian. The International Atomic Energy Agency ruled Thursday that Iran violated nuclear non-proliferation treaty obligations by stockpiling 400kg of highly enriched uranium.
