Escalating War, Yet Israel's Foreign Exchange Reserves Hit Record High
Jakarta, CNBC Indonesia - Entering the second week of Middle Eastern conflict between the United States and Israel against Iran that began in late February, surprising news has emerged from Israel’s central bank.
Amidst escalating conflict that is driving war costs upward and heightened geopolitical uncertainty, Israel’s foreign exchange reserves have reached their highest level in history.
The Bank of Israel reported that the country’s foreign exchange reserves position at the end of February 2026 reached US$234.553 billion. This figure rose by US$1.511 billion compared with the end of January 2026 position, marking a new record high. Relative to the size of its economy, Israel’s foreign exchange reserve level equates to 38.2% of gross domestic product (GDP).
This increase is particularly noteworthy as it occurred precisely when the Middle East descended into fresh turmoil. Days after the Bank of Israel decided to hold its benchmark interest rate in February, the United States and Israel launched attacks on Iran.
In its interest rate decision, the Bank of Israel highlighted increased geopolitical uncertainty, including the risk of conflict with Iran, as one reason for maintaining interest rates.
Why Israel’s Foreign Exchange Reserves Surged During War
The primary reason lies in the composition and valuation of the foreign exchange reserve assets themselves. The Bank of Israel confirmed that the increase in foreign exchange reserves in February 2026 was primarily caused by asset revaluation that added approximately US$1.739 billion to the reserve value.
Meanwhile, government foreign exchange activity actually reduced reserves by approximately US$271 million. In other words, Israel’s surge in foreign exchange reserves was not primarily due to a flood of new dollars entering the country, but rather because the value of the reserve asset portfolio it holds also increased.
Israel’s foreign exchange reserves reaching record levels provide a strong cushion for the shekel’s exchange rate value amid war. With substantial foreign currency buffers, the Bank of Israel has greater latitude to maintain market stability and dampen shekel fluctuations if external pressures intensify. However, the daily direction of the shekel remains heavily determined by developments in the war and global investor sentiment.
In terms of movement, according to Refinitiv, Israel’s currency, the shekel (ILS), is currently in an uptrend against the US dollar.
This is clearly evident over the past 12 months, with the shekel strengthening approximately 14.82% against the greenback. With the latest exchange rate at Monday’s (9 March 2026) trading close positioned at ILS 3.082/US$, or strengthening 0.35% in a single day.