Israeli Economy Confronts Difficulties Amid 12-Day Conflict with Iran, Resulting in Billions of Dollars in Economic Losses
Escalating War Expenditures Surpassing $12 Billion and Emerging Public Finance Issues
The Israeli economy is experiencing significant strain as a result of the 12-day conflict with Iran, which has incurred substantial costs, estimated at hundreds of millions of dollars, according to various media sources and expert analyses.
In the initial week of military operations against Iran, Israel reportedly expended approximately $5 billion, as stated by the Financial Express. Daily war expenditures soared to about $725 million, with $593 million allocated for offensive measures and $132 million earmarked for defense and military mobilization efforts.
The Wall Street Journal highlighted that Israel’s daily expenses for anti-missile air systems varied between $10 million and $200 million.
If the conflict were to extend for an additional month, total expenditures could surpass $12 billion, according to the Aaron Institute for Economic Policy based in Israel.
Naser Abdelkarim, an assistant professor of finance at the American University of Palestine, conveyed to Anadolu that the attacks not only impacted direct military spending but also disrupted production activities within Israel. He estimated that both direct and indirect costs could escalate to around $20 billion.
Abdelkarim further indicated an anticipated increase in Israel’s budget deficit by 6%, exacerbated by compensation payments made to affected citizens, which will worsen public financial conditions.
During the first week alone, more than 10,000 Israelis evacuated their residences, while approximately 36,465 individuals filed claims for compensation through the Israel Tax Authority.
To address the expanding budget deficit, Abdelkarim noted that the Israeli government is contemplating one of three strategies: reducing public sector spending on health and education services; raising taxes; or resorting to borrowing—an action that could elevate the public debt-to-national income ratio above 75%.
The Israeli Ministry of Finance disclosed that national financial resources are dwindling rapidly. It has requested a transfer of $857 million to the Ministry of Defense while simultaneously seeking cuts amounting to $200 million from health care, education, and social service budgets.
As reported by the financial publication Globes, a large portion of these funds will be allocated towards covering expenses related to military personnel.
Approximately 450,000 reservists have been called up as part of extensive mobilization efforts during this period.
Following the onset of hostilities, Abdelkarim observed a decline in the value of the Israeli shekel against the US dollar down to 3.7; however it later rebounded slightly to 3.5 due in part to dollar weakness and speculative trading activities contributing to this modest recovery.
**Investor Anxiety Impacts Israeli Economy**
Experts warn that prolonged conflict may lead to a slowdown in economic growth rates alongside increases in unemployment and poverty levels.
Iran has targeted vital infrastructure within Tel Aviv and Haifa; notably an assault on Bazan—the largest oil refinery in Israel—resulted in estimated daily losses around $3 million according to Financial Times reports.
Operations at Ben Gurion Airport were suspended following retaliatory strikes from Iran. Normally handling approximately 300 flights and serving around 35,000 passengers each day, operations have only partially resumed as of Sunday for repatriation purposes. This interruption is likely contributing further economic losses.
The suspension at Israel’s largest airport coincided with El Al Airlines halting flights and rerouting aircrafts as a precautionary measure against potential threats.
A flight bound for Paris was diverted mid-route landing instead in Cyprus while another headed towards Bangkok made an unscheduled stop in Rome. The operational costs linked with these events are projected at around $6 million.
Financial markets have also faced setbacks amidst growing military tensions; Iranian missile strikes recently targeted Israel’s diamond exchange—a sector accounting for roughly 8% of total exports—heightening concerns within Tel Aviv’s stock market according to insights from the Israel Diamond Institute.
This downturn prompted investor panic leading to selloffs which accelerated market declines thereby jeopardizing short-term economic stability.
**Ceasefire Reached**
On Monday, US President Donald Trump announced that both Israel and Iran had reached a “complete and total” ceasefire amidst escalating Middle Eastern conflicts. This ceasefire took effect at 0400 GMT Tuesday with Trump urging adherence from both parties involved.
However earlier on Tuesday morning Israeli Defense Minister Israel Katz ordered intensified airstrikes on Tehran claiming violations had occurred regarding this truce—a charge denied by Iranian officials who promised retaliation against any future attacks.
On Monday evening Iran launched missiles targeting Al Udeid Air Base used by US forces stationed in Qatar marking a significant escalation following recent US strikes on three Iranian nuclear facilities conducted on Sunday as part of ongoing US-backed military actions against Iran since June 13 prompting retaliatory responses directed toward Israel from Tehran authorities who report casualties including at least 25 fatalities alongside hundreds injured due primarily missile strikes executed by Iranian forces during this period while also reporting over430 deaths along with more than3500 injuries among Iranians attributed directlyto Israeli assaults per statements issuedbyIranianHealthMinistry .
