Israel's War Costs Reach $57 Billion Amid Ongoing Iran Conflict and Economic Impact

The Bank of Israel reports a $57 billion cost to the economy due to the Gaza campaign and ongoing Iran conflict, with significant impacts on GDP and increased debt. The war has closed the Strait of Hormuz, raising Brent crude prices above $100, prompting concerns about global energy security. Trade with hostile EU nations has dropped, while labor shortages further strain the economy. Future defense spending is expected to remain high, raising concerns about Israel's fiscal outlook.

Published Mar 25, 2026

Israel's economy has incurred a $57 billion cost due to the Gaza campaign and the ongoing conflict with Iran, representing 8.6% of GDP from October 2023 to 2025. GDP growth is projected at only 1% in 2024 and 2.9% in 2025, well below pre-war forecasts.

AI-curated by Theia

The debt-to-GDP ratio reached 68.5% by the end of 2025, with interest payments at $16 billion. Trade with eight EU countries dropped by $2.5 billion in 2024-2025. Labor shortages and military mobilization have tightened the job market, raising wages without increased output.

The Iran conflict, which began on February 28, has triggered additional fiscal pressures. The Bank of Israel warns defense spending will remain elevated, with long-term costs likely to exceed current estimates.