Can Israel's economy withstand multiple conflicts?

With Israel fighting on at least two fronts, the country's finances and economy are strained. The government hopes higher taxes can cover some of the bills while its high-tech industry remains a safe investment.

War is expensive. Besides causing destruction, personal tragedies and deaths, it costs a lot of money to buy and mobilize equipment. It also costs manpower as Israel — and its economy — is finding out on multiple fronts.

Since the militant islamist group Hamas attacked the Jewish state on October 7, 2023, Israel has been engaged in intense fighting in Gaza. After that, Israel launched airstrikes into Lebanon as retaliation for cross-border Hezbollah missile and drone attacks. Last week, Israel struck deep within Iran with the aim of disabling its nuclear capabilities.

Israel has big problems and big budgets With all this going on, Israel's economy is under significant strain. Many reservists have been called up to fight forcing them to temporarily leave their jobs. Adding to this labor shortage, work permits for many Palestinians have been cancelled and crossing borders has become increasingly difficult for them.

All this makes filling job vacancies difficult. In April, the country reported a 3% unemployment rate, down from 4.8% in 2021.

At the same time, military spending in Israel has surged. In 2024, it grew by 65% to reach $46.5 billion (€40.4 billion), according to a report by the Stockholm International Peace Research Institute published in April. That brings its military spending to 8.8% of GDP — the second highest in the world after Ukraine.

Iron Dome interceptions seen above Tel Aviv

02:06 The country's 2025 budget includes spending of 756 billion Israeli shekels ($215 billion; €187 billion) — a 21% rise over the previous year. It is set to be the largest budget in Israeli history and includes $38.6 billion for defense, according to reporting in The Times of Israel.

Israel's economy faces uncertain future Itai Ater, an economics professor at the Coller School of Management, Tel Aviv University, says the war is "very expensive" at the moment, and there is "huge uncertainty about the near and long-term future."

"The military costs on both the offensive and defensive fronts are very high. This will surely impact the budget, the deficit, the GDP and the Israeli debt," Ater told DW.

The costs are indeed high. In the past 20 months, many Israelis have spent hundreds of days in reserve duty. Others have been evacuated from their homes near border regions leading to big disruptions in their lives. Social services are under strain.

Since last Friday's attacks, many people have not worked, including in manufacturing, trade, tech and the education system, says Ater.

Commercial flights in and out of the country are also currently suspended. Airlines have evacuated their jets and airspace over much of the Middle East is closed.

This analysis of the Iran war made a year ago talks about what are the outcomes if the US decides to invade Iran. It's impressive how the professor captures many details and even discourses that are now being reproduced by the West.

We all know Bernie has its many limitations, and how he likes to co-opt movements for then water them down. He made many mistakes in his life, like voting for the intervention in Yugoslavia. However, at least in what concerns this conflict, I like how he grew a spine and is voicing his opinion this time at least. Some people who follow him will get his message.