The economic toll of Israel’s wars

Since the First Intifada in 1987, every major flare-up of the Israeli-Palestinian conflict has triggered a recession in Israel. | REUTERS

By Joseph Zeira
Project Syndicate

Nov 11, 2026

JERUSALEM – Israel’s election results make weeks of political negotiation all but certain. What is equally clear is that whatever government eventually takes office will need to begin reckoning with the mounting costs of Israel’s ongoing wars.

Although Israel has been at war since October 2023, many observers argue that its economy has held up remarkably well, pointing to the booming stock market and the strength of the shekel as evidence. Has it?

The answer depends on how we measure the economic costs of war. Direct budgetary costs are measured primarily by the increase in defense expenditures. But then there are indirect costs, reflected in the impact on the business cycle, and the precedents are clear: Since the First Intifada in 1987, every major flare-up of the Israeli-Palestinian conflict has triggered a recession.

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