War is never purely an economic endeavor, yet funding it effectively is crucial to victory. Resources are essential to sustain military operations, support troops, and maintain logistics. The financial strain of prolonged conflict can significantly impact a nation’s economy.

Israel’s economy has faced severe consequences due to the ongoing war in Gaza, particularly following the October 7 attack. Thousands of businesses suffered as reservists abandoned their civilian roles to join the military, leading to a rapid contraction of the economy. The impacts are expected to persist for years.

According to a quarterly report from the Organization for Economic Cooperation and Development (OECD), Israel experienced the sharpest economic slowdown among its 38 member nations between April and June 2023. The economy shrank by 4.1% during the early months of the conflict and continued to contract, albeit at a slower pace, throughout the first and second quarters of 2024.

Amidst this economic downturn, military spending has skyrocketed. Projections suggest the war could cost Israel up to 253 billion shekels ($67 billion) between 2023 and 2025, representing nearly 13% of Israel's GDP, in addition to regular military expenditures of 4.5% to 6.5% of GDP.

The conflict has also affected Israel’s credit rating, making debt more expensive. Moody’s has warned that a full-scale war with Hezbollah or Iran could lead to significant credit consequences for Israeli debt issuers.