Israel’s ongoing war with Iran is exacting a staggering economic toll, with estimates pegging the cost at approximately $200 million per day.
As the war escalates, experts warn that a prolonged conflict could push Israel’s economy toward collapse, presenting unprecedented challenges for the nation’s financial stability and global standing.
The direct costs of the war include military operations, such as the mobilization of 300,000 reservists in the early stages of the Gaza conflict, which alone cost the state treasury an estimated NIS 100 million ($27 million) per day in salaries and additional expenses for sheltering and feeding soldiers. Indirect costs, such as lost economic output due to reservists’ absence from the workforce, add another NIS 100 million daily, bringing the total to roughly NIS 200 million ($54 million) per day for the Gaza campaign, a figure now compounded by the intensifying conflict with Iran.
The war’s economic strain is already evident. Israel’s GDP growth forecast for 2025 has been slashed from 4.3% to 3.6%, reflecting the burden of sustained military operations and reserve call-ups. The Finance Ministry has set a deficit ceiling of 4.9% of GDP, or 105 billion shekels ($27.6 billion), but the emergency reserve has been largely depleted by the Gaza conflict, leaving little buffer for the Iran war. A former Israeli defense official estimated that the first two days of fighting with Iran alone cost 5.5 billion shekels ($1.45 billion), with daily costs split evenly between offensive and defensive operations.
The broader economic impact is severe. Approximately 60,000 Israeli businesses closed in 2024 due to manpower shortages, logistics disruptions, and subdued consumer sentiment, far exceeding the annual average of 40,000 closures. Sectors like tourism, construction, and agriculture have been hit hardest, with tourism—a $12 billion industry before the war—nearly collapsing as airlines cancel flights and visitors avoid the region. The high-tech sector, a cornerstone of Israel’s economy, remains resilient but faces risks if the conflict persists, with warnings that prolonged uncertainty could drive mobile tech workers to relocate abroad, draining tax revenues.
Credit rating agencies have sounded alarms warning that a prolonged war with Iran could lead to a downgrade of Israel’s credit rating from A to A-, increasing borrowing costs and undermining investor confidence.
The war’s regional escalation adds further pressure. Israel’s attacks on Iran’s oil and gas infrastructure, including the South Pars gas field, have disrupted global energy markets, pushing oil prices up 7-11% and threatening inflation in energy-importing nations. Iran’s response, including potential threats to close the Strait of Hormuz, could exacerbate global economic fallout, further isolating Israel economically.
