With all the euphoria over the ECB’s LTRO operations and a second bail-out for Greece, the possibility of an Israeli attack on Iran is still lurking in the background as a bigger possible shock to the world.

Higher oil prices as sanctions on Iran start to bite and a fall in Israeli equities — one of the few stockmarket losers this year, according to S&P Indices (see blog below this one)  are among the effects so far.

Citi analysts Luis Costa and David Lubin have returned to London from a trip to Israel this week and have soothing words to say on the topic:

In our meetings with political/defence analysts, the feedback we have is not suggestive of an imminent attack against Iran. The argument that oil sanctions imply a “waiting period” before a possible attack has been used many times by locals, and we tend to agree with it.

But they add that investors are likely to be reluctant to go into Israeli assets just now, and recommend selling the country’s currency, the shekel. Instead they advise investors to buy the rouble, the currency of oil exporter Russia.