Israeli central bank Governor Amir Yaron is set for another five-year term after finally winning the backing of Prime Minister Benjamin Netanyahu and his finance minister, a decision made six weeks into the war with Hamas that’s exposed political divisions among top officials.

The announcement by Netanyahu’s office on Monday said the reappointment will be submitted for the government’s approval at its next meeting. The Bank of Israel later issued a statement that said Yaron accepts the offer, which the governor called a “vote of confidence” in him and the institution.

Israeli stocks extended their gains after the announcement, which came on social media platform X. The shekel remained weaker against the dollar.

War Budget Leaves Netanyahu Caught Between Markets and Politics

The extension for Yaron removes uncertainty for investors who’ve been whipsawed by the fallout of the conflict with Hamas as well as months of unrest caused by the government’s effort to overhaul the judicial system.

Yaron, who was previously a finance professor at the University of Pennsylvania’s Wharton business school, has been a critic of fiscal policy during the conflict and previously questioned the attempt by Netanyahu’s cabinet to weaken the power of judges.

The governor, whose current term ends next month, had planned to disclose if he wanted to stay on in October. But the outbreak of the Israel-Hamas war prevented the announcement.

Central bank autonomy has been a focal point for investors in Israel, who have raised concerns about the outlook for the country’s monetary policy should a new governor take over the institution that was led for over a decade by Stanley Fischer.

The central bank has been thrust into the spotlight since the conflict erupted on Oct. 7, rolling out emergency measures to supply dollar liquidity to local lenders and sell foreign exchange for the first time since it allowed the shekel to trade freely.

The effort — as well as the conflict being largely contained to Gaza rather than turning into a regional war - stabilized markets, with the Israeli currency reversing a plunge of almost 6% in October that took it to an 11-year low of against the dollar. The Bank of Israel sold $8.2 billion in October as part of its unprecedented interventions.

Plucked from academia in 2018, Yaron helped steer the $520 billion economy by slashing interest rates near zero, before embarking on a record cycle of monetary tightening last year as inflation surged to the fastest since 2008.

Born in Israel, he earned his undergraduate degree at Tel Aviv University. At the University of Chicago, where Yaron obtained his doctorate, his thesis adviser was Lars Peter Hansen, who shared the 2013 Nobel prize in economics with Eugene Fama and Robert Shiller for analysis of how financial markets work and assets such as stocks are priced.

Before taking the governor job, Yaron spent two decades at Wharton and was also a visiting scholar at the Federal Reserve Bank of Philadelphia. Four years ago, he won the Stephen Ross financial economics prize for a 2004 paper he co-wrote on long-run risk.

At Loggerheads

Still, until now, doubts persisted about Yaron’s future. Even earlier on Monday, a parliamentary committee discussed prolonging his term by only six months, drawing the ire of the opposition.

When Netanyahu formed a three-member “war cabinet” with his political rival, ex-Defense Minister Benny Gantz, their agreement stipulated that all senior officials will remain in office throughout the conflict.

The lack of a decision on Yaron prompted 200 top Israeli business leaders to write a letter to Netanyahu and Finance Minister Bezalel Smotrich this week that urged the extension of his term.

A separate group of 300 economists addressed Gantz in a letter that said he needed to make sure that Yaron stays on as “the adult responsible for managing Israel’s economy.”

“Such an appointment will ensure stability and continuity, and will help restore the economy and investor confidence,” they said.

Yaron and the central bank’s research department have recently criticized the government’s unwillingness to scrap budget outlays on religious programs and West Bank settlements at a time when it’s under pressure to raise funding to finance the war effort.

Tensions between the central bank’s head and the cabinet aren’t unusual, with Yaron’s predecessor, Karnit Flug, clashing frequently with politicians, even as the governor serves as an economic adviser to the government.

But the tenor of the recent attacks has grown more alarming, especially before the war when several ministers assailed Yaron and called for his ouster.