Israel Markets Drop on Reports Netanyahu May Fire Defense Chief

Israeli markets weakened after widespread reports in local media that Prime Minister Benjamin Netanyahu was considering firing his defense minister، Yoav Gallant، and replacing him with Gideon Saar، an opposition lawmaker.

The shekel fell 0.7% to 3.74 per dollar as of 2:25 p.m. in Tel Aviv، once of the worst performances globally، while yields on local bonds rose.

Netanyahu’s office put out a statement soon after the emergence of the reports، carried by broadcaster Kan، the Jerusalem Post and others. While he denied he was in negotiations with Saar، he did not refer to Gallant.

“The reports on the matter of negotiations with Gideon Saar are not correct،” Netanyahu’s office said. Gallant’s office declined to comment to Bloomberg.

Clashing over the war in Gaza

Netanyahu and Gallant have frequently clashed over the war in Gaza against Hamas and whether or not to accept a cease-fire that would lead to the release of hostages held by the Palestinian militant group.

Most recently، Gallant was the only member of the 10-person security cabinet to vote against a policy to maintain a military presence in Gaza’s so-called Philadelphi corridor. Netanyahu’s insistence that troops remain in the corridor، which runs along the Gaza-Egypt border، has angered Hamas and Cairo and proved a key sticking point in the truce talks.

Gallant، a retired admiral، also crossed swords with Netanyahu last year over a divisive judicial overhaul plan championed by the prime minister. Noting that some anti-government protesters were threatening not to turn up for military reserves duties، Gallant publicly warned that Israel’s war—readiness was being sapped. Netanyahu announced Gallant’s dismissal and then walked back after a wave of street demonstrations.

Gallant’s open channels with the Pentagon have helped the Israel-US alliance weather tensions between Netanyahu and US President Joe Biden، especially after the Gaza war erupted last October. Israeli polls have generally shown Gallant to be more popular than the legally embattled prime minister.

The defense minister belongs to Netanyahu’s Likud party، while Saar، a veteran lawmaker، heads a party that has four members in the 120-seat parliament، or Knesset. If Saar joined the ruling coalition، that would boost Netanyahu’s political strength.

‘Political Machinations’

Benny Gantz، another opposition leader who quit the emergency government in June after clashing with Netanyahu، said the prime minister was prioritizing his political survival over the return of the hostages، defeating Hamas and dealing with Hezbollah militants based across Israel’s northern border in Lebanon.

“He is busy with disgraceful political machinations and a replacement of the defense minister ahead of an intensive campaign in the north،” Gantz said on Monday on X، formerly known as Twitter. “This indicates poor judgment.”

Saar، 58، held cabinet portfolios in previous Netanyahu governments. After a failed bid to unseat Netanyahu as Likud leader in 2019، Saar created the New Hope party and later allied himself with Gantz.

Saar، together with Gantz، joined Netanyahu in the emergency government after the Oct. 7 attack by Hamas that triggered the Gaza war. In March، Saar split with Gantz and withdrew from the government، complaining of his exclusion from the narrow war cabinet that was handling day-to-day decision-making.

Saar’s military experience is limited to a stint as an infantry conscript. He is a lawyer by training and former attorney-general’s aide.