Israeli stocks were taking another beating Thursday as the IDF began to escalate Operation Just Reward after Wednesday's Hizbullah attack in which eight soldiers were killed and two were kidnapped. The shekel, meanwhile, was heading for its biggest two-day decline in eight years. The currency fell to 4.4960 against the US dollar from 4.4452 late Wednesday. Over the past two days, the shekel has declined just under 3 percent. "We think the market will be volatile today based on different views on the likelihood of best-case and worst-case scenarios. Events on the ground in the coming days will likely drive these views and the market," Clal Finance Batucha told clients in its morning note. Thursday saw dozens of Katyusha attacks that killed one and wounded dozens in northern Israel. In response, IDF forces laid siege to Lebanese ports and airspace. Attacks included regular bombardment of Hizbullah positions in southern Lebanon and the bombing and closure of the Beirut International Airport. The TA-25 bounced off an early low of 743.07 but remained sharply lower in midday trading, down 27 points, or 3.4%, at 755.46. The skid comes on the heels of Wednesday's 4.2% slide. The TA-100 index was off 29 points, or 3.6%, at 767.49. "Although price levels are attractive, we would not recommend entering the market at this time, until it becomes clear whether this will be a relatively short or extended escalation, " Excellence Nessuah told its clients. "We believe the most likely scenario will be a relatively short but massive Israeli retaliation in Lebanon, with the objective of establishing deterrence. This would be viewed positively by the market, as investors will anticipate a quick end to the situation. Alternatively, if it becomes apparent that the situation will drag on for months, we will see further pressure on equities." Insurance stocks were among the biggest losers after Migdal warned that it might report a second-quarter loss due to stock market losses during the period. Migdal shares dropped 8.2% to NIS 4.96, Harel fell 7% to NIS 165.8 and Clal gave up 6.3% to NIS 78. Bank shares also suffered more declines. IDB Holding shed 4.2% to NIS 91.75; Hapoalim slumped 4.7% to NIS 18.62; Leumi slid 4.1% to NIS 15.41; and Mizrahi-Tefahot was down 4.5% to NIS 24.42.