Shekel Tumbles As Israel's Security Cabinet Declares Country At War

Israel's Security Cabinet formally declared that the country is at war after Palestinian militants led by Hamas launched massive attacks from the Gaza Strip by land, sea and air killing hundreds of civilians and taking others hostage. The IDF responded with a counteroffensive, striking multiple sites across the Gaza Strip.

• Israel's top brass voted on Saturday night to activate the so-called "Article 40 Aleph" (also known as "Clause 40") which implies an official declaration of war. The government invoked the clause for the first time for the first time since the 1973 Yom Kippur War.
• Prime Minister Benjamin Netanyahu proposed the formation of a temporary national unity government to deal with the situation. National Unity's Benny Gantz, Yesh Atid, Yair Lapid and Yisrael Beytenu's Avigdor Liberman said they were open to talks but only when certain conditions are met.
• The unexpected attack will fuel calls for a review of Israel's failure to anticipate and prevent the offensive and may bolster support for right-wing hardliners, who have been advocating a tougher stance on Gaza terrorism. Internationally, it will complicate the Saudi-Israeli normalisation talks.
• Regional assets are under pressure as the new week gets underway, with USD/ILS up 332 pips at 3.8861. The rate had earlier topped out at 3.9280, its highest point since February 2016. USD/TRY briefly spiked to a record high of 27.7026 before pulling back. Israel's benchmark TA-35 Index has shed 6.5%, re-testing its February lows.