Traders pushed Gadi Eisenkot's prime-minister contract to about 63 cents during record-pace voting. Exit polls then showed Likud as the largest party and neither bloc near 61 seats, and the contract fell to about 50 cents. Benjamin Netanyahu's rose to about 31 cents.
For most of Tuesday, prediction markets traded Israel's election on the only number available: how many people were voting. When the first real information arrived, they reversed much of the move.
Exit polls from Channels 11, 12 and 13, released when voting ended at 10 p.m. in Israel, 4 p.m. Eastern, showed neither camp close to the 61 seats needed for a majority in the 120-seat Knesset. The opposition bloc of Gadi Eisenkot's Yashar, Naftali Bennett's B'Yachad, Yisrael Beytenu and the Democrats was projected at 50 to 53 seats, against about 50 for Prime Minister Benjamin Netanyahu's bloc. The Arab-led Joint List and Ra'am were projected at a combined 17 to 18 seats.
Netanyahu's Likud was projected to remain the largest party, with 24 to 25 seats, ahead of Yashar at 21 to 23. Channel 12's poll put Likud at 24, Yashar at 22, B'Yachad at 12 and the Joint List at 11, with the opposition bloc at 52 and Netanyahu's at 50.
The market's round trip
On Polymarket, the contract on whether Eisenkot will be the next prime minister last traded at 50.5 cents at about 4:11 p.m. Eastern, down about 9.5 points in an hour. It had risen to 62.85 cents by early afternoon, from 54.75 cents early on Tuesday, and touched 65.35 cents around noon. Netanyahu's contract last traded at 31 cents, up 4 points in the hour, after falling as low as 18.5 cents at midday.
Trading was heavy. Netanyahu's contract changed hands about $6.9 million over 24 hours. Eisenkot's traded about $594,000, with only about $78,000 of liquidity on its order book, so moves of several cents can come from a handful of trades.
Eisenkot ended the day roughly 4 points below where he started it, and Netanyahu about 3.5 points above.
What the day's trading assumed
The election-day rally rested on turnout. The Central Elections Committee reported record turnout at several daytime checkpoints in records going back to 1973, including 55.7% by 4 p.m. local time against 47.5% at the same point in 2022. By 8 p.m. turnout was 74.3%, against 66.3% at that hour in 2022, already above the 2022 total. Netanyahu had warned during the day of a surge in Arab turnout and said "they're trying to steal the election from us." Arab political leaders called the remarks racist, and the committee said it saw no indications of systematic tampering with ballot slips.
Traders appeared to read high turnout as favorable to the opposition. The exit polls did give the opposition a slightly larger bloc, but they also made Likud the largest party and left both camps short. Turnout, in the end, did not settle anything.
Why the prime-minister contract is hard to price
The contracts settle on who is sworn in as prime minister, not on seat counts, and the exit polls point to a long coalition process. Eisenkot has rejected serving under Netanyahu, including in a rotation, and other opposition leaders have also ruled out joining a Netanyahu-led government, the Jerusalem Post reported. Opposition leaders, except the Democrats' Yair Golan, have largely ruled out governing with the Arab parties, whose projected 17 to 18 seats could make them pivotal. That leaves no obvious 61-seat combination on the exit-poll numbers, and a further election cannot be ruled out.
The two contracts together now sum to about 81.5 cents, down from about 86 cents in the early afternoon. The market is assigning more weight to outcomes in which neither man becomes prime minister soon, or at all.
The other markets
The shekel held part of its gain. The dollar was at 3.0516 shekels at about 4:11 p.m. Eastern, down about 0.03 on the day but up from 3.0286 in the early afternoon. A U.S.-listed Israel stock ETF was up 1.6%, after trading 2.2% higher earlier. The direction matches the prediction-market move but does not prove a link.
Two readings
One reading is that the market corrected sensibly. Exit polls are the first information about how people voted, they show a near tie between the blocs with Likud in first place, and a contract that had priced Eisenkot as a clear favorite on turnout alone came back toward even odds.
The other is that the market may now be underpricing Eisenkot's bloc. It is level with or ahead of Netanyahu's in the exit polls, Netanyahu's bloc is about 11 seats short, and Eisenkot does not need the largest party to form a government. Exit polls can also differ from final counts, and a shift of a few seats would change the coalition arithmetic.
What to watch
The official count overnight and through the week, how the final results compare with the exit polls, which party leaders recommend to the president as prime minister, the first coalition talks, and the official results expected by Nov. 4.