Bank of Israel Cuts Rates 25bps to 3.75% — Cites Iran War Deal Progress; Shekel Surges to 30+ Year High (~2.9 NIS/Dollar) — Day 87

The Bank of Israel cut its benchmark interest rate from 4.00% to 3.75% (a 25 basis point reduction) on May 25, 2026 (Day 87) — the second rate cut of 2026. The Monetary Policy Committee explicitly cited progress toward an end to the Iran war as a key factor in its decision, pointing to the surging shekel as evidence that markets are pricing in a high probability of deal closure. The Israeli shekel appreciated to approximately 2.9 NIS per US dollar — a 30+ year high — on compounding deal optimism from Trump's 'largely negotiated' claim (Day 85), Axios's nuclear deal parameters (Day 86), and Rubio's 'pretty solid thing on the table' (Day 87). The Bank of Israel rate cut serves as a significant institutional confidence signal — it reflects the Israeli central bank's assessment that the security risk premium on the Israeli economy is declining materially. Israeli opposition chairman Yair Golan (Democrats party) publicly criticized PM Netanyahu on Day 87, stating that 'the arrangements most critical to Israel's security are being finalized without us' and that Israel will 'likely learn the details of the agreement only after the fact' — reflecting deep Israeli political tension over being excluded from the US-Iran deal framework. The Bank of Israel's 25bps cut marks the first time in the conflict that Israeli monetary policy has moved to reflect war resolution rather than war escalation.