Israel's TA-25 index plunged 4 percent Wednesday, making it the largest decliner among the world indices, in the wake of the upsurge of violence in Lebanon and Gaza. It was the biggest one-day drop for the benchmark index since January when stocks tumbled after Hamas's election win. The TA-25 slid 34.31 points, to 782.06 - erasing all of the gains of the last week. Every stock in the index declined, with the heaviest losers emerging in the banking and real estate sector, as investors took fright at the prospect of a protracted military campaign. "Banking stocks tend to rise and fall faster than the market itself, so on a day like today it is no surprise to see Hapoalim and Leumi hit hard," said Avi Weinreb Clal Finance Batucha. Leumi shares dropped NIS 0.67, or 4%, to NIS 16.05 while Hapoalim shares fell NIS 0.97, or 4.7%, to NIS 19.53. As small investors sold their holdings, institutional and foreign traders went further, going short of the market in the expectation that the index would decline further over the coming sessions. "At around 10:30, as the news was breaking, a foreign trader took a $12m. short position in the TA-25, which alone accounted for around 10% of the volume at the time," said Weinreb. "While the pension funds were probably net buyers of the market today, mutual funds were net sellers," said Weinreb. "Smaller investors will have said 'Why should I buy today when I could wait until tomorrow and see what the military does in the meantime?'" he added. The broader TA-100 index fell 35.6 points to 796.16. Seven IDF soldiers were killed Wednesday in a Hizbullah attack on IDF forces patrolling the Lebanese border, the army has confirmed. Three of the soldiers who were killed were riding in a Hummer jeep when it was attacked, while two other soldiers in the same jeep were kidnapped. The IDF also confirmed that since Wednesday morning, 15 terrorists were killed in the central Gaza Strip. "We know from previous experience that security crises [such as these] make clients less likely to invest in long-term products such as shares or property," said Rami Sasson, CEO of Bank Adanim. Deutsche Bank, however, recommended the drop as a buying opportunity. "While recent events and increased violence certainly raise the level of uncertainty, we do not think that there is anything here yet to upset the strong macro story," analyst Michael Klahr told clients. "Rather, we see higher US rates and a hard landing for the US and global economy as the key threat to the robust local economy." The shekel also took a pounding as traders sold off their holdings in the currency, switching to "safer" money elsewhere. The shekel lost over 1.2%, falling 5.4 agorot to 4.44 against the dollar. The currency had been enjoying a strong run lately, trading at 13-month highs, but the heightened violence led investors to book their profits and sell the shekel rather than wait for the storm to blow over. "Despite the positive macroeconomic momentum in Israel's economy, the current unrest needs to be taken into account," said Leonor Terkieltaub, vice-president at Gift Asset Management. "At least in the short-term, the dollar/shekel exchange rate will trade in the direction of 4.505. As known, geopolitical events have a short-term effect and as such we can not draw long-term effects."