A controversial judicial reform law and the intense public protest against it are taking a toll on Israel's economic outlook.

Tel Aviv's stock exchange has taken a 20 percent hit, and the shekel has seen serious swings. Credit rating agencies Fitch and Moody's warned on Tuesday that the turmoil could 'weaken Israel's credit profile'. Some Israeli venture capitalists are exercising caution as the uncertainty continues. Israel does little trade with its closest neighbors, but its reputation for political stability in a volatile region is central to its strong trade ties with the US as well as major European and Asian economies.

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