Netanyahu's Move to Fire Gallant Spurs Political Turmoil and Market Reaction

Reports that Israeli Prime Minister Benjamin Netanyahu might fire Defence Minister Yoav Gallant caused political upheaval and financial market declines in Israel. Under pressure from far-right coalition partners, Netanyahu is contemplating replacing Gallant with opposition member Gideon Saar. This situation impacts Israel's security amidst rising tensions with Hezbollah and economic uncertainties.

Reports that Israeli Prime Minister Benjamin Netanyahu might fire Defence Minister Yoav Gallant caused political upheaval and financial market declines in Israel on Monday. Major Israeli television channels and news websites indicated that Netanyahu, pressured by far-right coalition partners, was considering replacing Gallant with Gideon Saar, a former ally turned rival now in the opposition.

Such a decision would significantly impact Israel's political and security landscape, especially amidst the growing threat of conflict with Iran-backed Hezbollah in Lebanon. The shekel weakened by 1% to nearly 3.75 versus the dollar, and Tel Aviv share indices fell between 1.4% and 1.6%.

Israel's currency was expected to appreciate following Sunday's data showing a higher-than-expected inflation rate of 3.6% in August. Analysts say this increase will delay rate cuts until 2025, contrasting with the anticipated rate reductions in the United States and Europe. Although Netanyahu denied being in negotiations with Saar, he did not comment on Gallant's future. Saar also denied any coalition negotiations.

This is not the first clash between Netanyahu and Gallant, who have disagreed on various government policies, including the handling of the Gaza conflict and a potential ceasefire deal with Hamas. Centrist lawmakers criticized Netanyahu for focusing on political drama rather than addressing ongoing security issues.

Police Minister Itamar Ben Gvir, leader of an ultranationalist party in Netanyahu's coalition, has long advocated for Gallant's dismissal, arguing he is not suitable to manage the northern conflict with Hezbollah. Tens of thousands of Israelis have been displaced due to daily rocket fire from Hezbollah near the Lebanese border. Gallant, a former general, emphasized the need for military action to return evacuated residents to their homes. In March 2023, Netanyahu's earlier attempt to fire Gallant over a judicial overhaul plan led to mass protests and a subsequent reversal.

(With inputs from agencies.)