Tel Aviv stock indices soared to new highs Sunday, as investors and analysts expressed a vote of confidence in the Israeli market following the announcement of a multi-billion investment by American investor Warren Buffett, in the Israeli metal cutting tools manufacturer Iscar Metalworking Companies., owned by the Wertheimer family. "Looking at the market reactions, the Iscar-Buffett deal has been well received as a sign of confidence in the Israeli economy, breaking the ice and opening the door for increased direct investment by foreign investors," said Richard Gussow, senior analyst at Excellence Nessuah. "The hope is that on the back of this deal other previously hesitant investors will now follow suit." The Tel Aviv 25 Index gained 23.56, or 2.7 percent, to 895.79, its biggest one-day gain since August 8, 2005, while the Tel Aviv 100 Index rose 2.61% to 919.74 points. The Tel Tech Index closed up 1.75% at 425.07 points. Turnover totaled NIS 2.1 billion. Apart from the implications of the $4 billion deal itself on the country's economy, Gussow said the significance of the investment was in the kind of investor Buffett represented around the globe. "Buffett is not a risk taker. He is a slow and methodical investor, who decided that the political risk was not a veto factor to invest in Israel." Similarly Vered Dar, chief economist and strategist, at Psagot Ofek said: "If he [Buffett] invests such a substantial amount in Israel, he must know something that we should learn." Last year total foreign investment amounted to over $10b. of which $6b. represented direct investments. Buffett's investment alone, has already taken up a significant percentage of that amount this year. "2006 will with no doubt be the record year of all times for foreign investment into Israel," said Uriel Lynn, president of the Federation of the Israeli Chambers of Commerce. "Warren Buffett's $4b. acquisition of Iscar will boost Israel's economy by encouraging more foreign investment." The Iscar deal with Buffett's investment firm Berkshire Hathaway will generate $1b. in tax revenues, which represents more than 2.5 percent of the country's annual tax income. "This money comes to the state... [and] should do wonders for the economy, 25% tax on the deal - which is a lot of money for the country and will be a boost for the bond market," said Eran Jacoby analyst at Leader Capital Markets. Dar at Psagot Ofek believes the tax intake from the deal will reduce this year's budget deficit and the government's need to borrow, which in turn would ease interest rates. Jacoby emphasized that the investment would likely lower the country's economic risk premium, which was still high because of the security situation in Israel. In addition, the Ministry of Industry, Trade and Labor said Buffett would be granted status of strategic investor, which will give him a 10-year tax exemption, including on taxes on dividends. Berkshire's agreement to purchase an 80% stake in Iscar fits into the investment guru's plan to increase the diversification of Berkshire's earnings in terms of currencies as a way to protect from a sharp drop in the value of the US dollar. "We will have at Berkshire a fair amount of our earning power coming from other currencies and countries," said Buffett, who plans to return to Israel to look for more businesses to buy. Avi Krawitz contributed to this report.