As the fighting between Israel and Hamas risks bursting into regionwide chaos, the prospect of a long and potentially widening war could pile economic havoc atop a devastating human toll.
For Gaza, a broader conflict would almost certainly deepen the already worsening humanitarian conditions in the territory. And Israel faces a fresh blow to a resilient economy that until recently had been hailed as an entrepreneurial powerhouse.
The outlook for the Palestinian economy was already dire before Israel declared a siege of Gaza in retaliation for the Oct. 7 attacks, creating what the World Health Organization called a “humanitarian catastrophe.” An assessment this year by the International Monetary Fund said Israel’s blockade of the Gaza Strip and increased restrictions on the West Bank were significant obstacles to growth and private sector development.
In Israel, as many as 360,000 reservists are leaving their jobs and businesses to mobilize for military duty, bringing parts of the economy to a standstill. Israel’s technology industry, a driver of growth, has abruptly slowed. Production at a major Israeli offshore natural gas field has been shut down. The central bank has committed billions of dollars to prevent Israel’s currency, the shekel, from collapsing.
