Meanwhile, Israeli stocks trading in New York were getting hit as well, chased by their Middle Eastern connection and further pressured by rising oil prices and an overall weakness in major U.S. indexes. Teva Pharmaceuticals ( TEVA) fell 3.5% to $30.51, and Perrigo ( PRGO) declined 3.8% to $14.93 a share in New York.

Despite an upbeat buying opportunity recommendation by HSBC, shares of NICE Systems ( NICE), the digital recording and analysis company, slid 5% Thursday and have fallen more than 10% in the past two days. Saifun Semiconductors ( SFUN) dropped 3%, and Orbotech ( ORBK) declined 3.6%.

Altshuler estimates that most of the export-oriented companies are due for "a quick correction."

Even if the geopolitical turmoil persists or gets worse, "there is no reason for the large exporters to be affected," he says, adding that these companies are "an absolute buying opportunity." Altshuler owns, and recommends, all the above mentioned securities.

Economists from Bank Hapoalim wrote Thursday they expect slight declines in consumer spending in the near future, and that they will be most felt in the tourism industry. Israel is "starting a period of uncertainty that will not be a short one," the bank says.

Still, Israel's economy has proved resilient to unrest in the past, Bank Hapoalim notes. A low inflation rate, strong corporate earnings and a balanced fiscal policy will protect Israel's market from a serious hit, they say.

With $11 billion in foreign investment streaming into the local market in the first half of this year -- equivalent to the record amount of investment recorded during all of 2005 -- and a growth rate of over 5%, many investors are optimistic about the country's economic resilience.

During the May-to-June selloff, as the S&P 500 shed 5% and international markets such as Japan and Brazil crashed by 18% and 22%, respectively, the Israeli market fell less than 13%. Since then, it has managed to rise 6% in less than two weeks, only to fall back to an eight-month low depressed by this unexpected conflict.

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