August CPI in focus as higher oil prices increase inflation risks

ISRAEL - In Brief 14 Sep 2026 by Sani Ziv

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The Israeli economy was largely idle on Sunday for Rosh Hashanah (financial markets are always closed on Sundays), while the external environment deteriorated over the holiday period. Houthi advances near Bab el-Mandeb and attacks on Saudi oil infrastructure and shipping in the Strait of Hormuz pushed Brent close to USD 110 before easing to around USD 105, up almost 9% over the week. Higher oil prices and increased geopolitical risk could make the Bank of Israel somewhat less dovish in the near term (see below for our analysis of the expected August CPI). CPI preview: August inflation expected to rise to 1.7% Tomorrow, the CBS will publish the August CPI. We expect the index to rise by around 0.8% m/m, mainly due to higher prices for travel abroad and an 8% increase in fuel prices. Seasonal increases in housing costs and domestic holiday prices are also expected to contribute to the relatively high reading. Market forecasts for the August CPI range between 0.7% and 1.0% m/m, with an average forecast of around 0.85%. Annual inflation is expected to rise to 1.7%, from 1.5% in July, but remain below the midpoint of the Bank of Israel's 1%-3% target range. Looking beyond August, we expect the September CPI to decline by around 0.4%, largely due to the temporary reduction of NIS 0.50 per liter cut from the fuel excise tax. However, the sharp rise in oil prices over the holiday period has increased upside risks for the October reading and the following months. The August CPI will therefore be particularly important for monetary policy. The Bank of Israel has recently adopted a relatively dovish tone, but a strong August reading, together with the renewed rise in oil prices a...