The Tel Aviv Stock Exchange (TASE)'s various indexes fell on Sunday in reaction to the coalition's move to dismiss Shin Bet Chief Ronen Bar.
The TA-90 fell by 4.5%, TA-35 fell by 3.3%, TA-125 fell by 3.4%, and the banks index fell by over 6.5%.
These dips also followed a sharp depreciation of the shekel on Friday.
Or Poria, chairman of Poria Financial Planning, noted that local factors, including the intensifying ground operations in Gaza, continued missile and rocket launches from Yemen, Lebanon, and Gaza, and a potential crisis in Israel's judicial system, have weighed heavily on investors.
The crises include the government voting on Sunday to support a no-confidence motion in Attorney-General Gali Baharav-Miara, launching a highly controversial dismissal proceeding.
This is in spite of global markets showing a moderate positive trend.
Israeli markets remain undervalued
Despite the turmoil, Poria noted that Israeli markets remain undervalued and could yield higher returns in the long run.
Critics of Prime Minister Benjamin Netanyahu and his government coalition have blamed them for the market's dip.
Leading protest activists have stated that "this dictatorial coup is destroying Israel," adding that "the stock market crash is a direct result of the coalition's attack on democracy and security failures. Netanyahu must be stopped before he collapses the country."