Israel's shekel, bonds give muted reaction to Trump's Gaza takeover bid

Adds quote in last paragraph, updates prices, adds background

By Libby George

LONDON, Feb 5 (Reuters) - Israel's shekel was largely flat against the dollar on Wednesday, but its bonds edged slightly higher, after U.S. President Donald Trump said his country would like to take over the Gaza Strip.

The shekel was trading at 3.56 versus the dollar by 0950 GMT, up 0.1% from Tuesday's close. Israeli and Lebanese sovereign bonds were flat to higher, while those of Jordan and Egypt, were flat to lower.

"Markets are treating Trump's announced intention to take over the Gaza Strip and evacuate Palestinians to neighbouring countries with scepticism," said Francesco Pesole, an FX strategist with ING, adding that Trump's comments that the U.S. could deploy troops were "risk-off, oil-positive and dollar-positive, as Arab nations should firmly oppose the move".

Assets in Egypt and Jordan - which Trump has pressed to take in Palestinians displaced from Gaza - are highly sensitive to developments in the region. Investors view their trajectory as intertwined with international support that could be bolstered given their geopolitical importance to peace efforts.

Lebanon's defaulted dollar bonds returned around 100% last year as investors cheered the weakening of armed group Hezbollah and said parliament's election of the first president since 2022 could help pave the way for economic recovery.

Israel's economy has largely weathered the war.

But investors, and markets more broadly, were not immediately swayed by Trump's comments.

"The gap between the announced plans and their implementation is too great to react to the news in a meaningful way," said Alex Zabezhinsky, chief economist for brokerage Meitav Dash in Tel Aviv.