The comparatively simple question of this analytical overview, which ardently aims to avoid falling for any side’s propaganda in the latest Arab-Israeli armed conflict since 1948, is an economic one. Does war, in the sense of armed conflict between states or state and quasi-state actors, pay in the 21^st century in the short, medium, or long term?

This is a question of simplicity and even brutality – the best and most detailed economic balance sheet of any conflict is blatantly unable to capture and translate into quantifiable data the human price of a single collateral casualty, killed child, father, mother, or nonagenarian. Despite the topic’s apparently narrow scope, diving below the surface of the question and examining the seventh Israeli-Arab armed conflict through the lens of long-term implications reveals an incredibly complicated endeavor.

This is to say that it looks neigh impossible to undertake a full profit and loss accounting of the conflict that ensnared Israel, Palestine, Lebanon, Syria, Jordan, and Egypt on the horrible day of October 7, 2023 and exploded into uncountable horrors over the following two years until the supposed outbreak of good will in the Gaza Declaration of October 2025 and its ratification by the UN Security Council (UNSC) in its resolution 2803 on November 17 of this year.

An obvious first obstacle to such accounting is the fact that data are not only incomplete but also still in flux. While the flow of aggressions and atrocities has receded in recent months, destruction and violations of human life, health, and dignity are still wrought against individuals and families are ongoing as of this writing.

A correlated second obstacle to full accounting of conflict impacts is deliberate data opacity. The true extent of physical destruction and damages inflicted upon them has not been disclosed by several of the involved governments and non-state actors. Moreover, military expenditures on all sides are secretive at least in parts and undisclosed in realms such as information warfare, global online opinion manipulation, cyber-aggression and -defense, and traditional propaganda.

Uncertainty moreover defines real expectations and questions of future economic repercussions – and even upside risks through increased demand for “successful” weapons systems in international markets – from legal judgements and reputational and popular backlash. This uncertainty affects the estimation of costs of their conflict behavior to Israel more than the other polities under consideration.

A universal human impact factor, for which no exclusionary myths or pseudo-scientific fake narratives work, is the vulnerability of our species to mental trauma and anguish, with likely lengthy and costly detriments from the individual level to the global community. How productivity and peaceability will be restored for individuals who suffered life-altering injuries but perhaps are afflicted even more by issues from controlling anger to carrying lasting fears and psychological scars, is not really a question for which the study of wars in distant or recent centuries has ready answers. 

Fundamental questions on the economics of war, post-conflict reconstruction, and opportunity cost of war – the non-allocation of funds to trade development, integration of supply chains and production chains, joint efforts in mitigating external risks, or adjacent strategic services sectors from tourism to culture that would have good return on investment –are impossible to answer predictively.

In terms of modern game theory, the world has become accustomed to evaluating economic and societal behaviors in terms of win-lose, win-win, win-win-win, and lose-lose outcomes. Win-lose, or zero-sum scenarios, run counter to the human propensity for reciprocal altruism and building of economic alliances with mutual benefits. Thus, productive individuals and even states have a strong taste for systems that facilitate growth such as seen in the 30 years following World War II or the 20 years of the great moderation at the end of the 20^th century.  

However, systems and models that have been developed during such periods, including existing economic models of leading international financial institutions (IFIs) of Bretton Woods heritage, have not been constructed with a view to global armed conflict. Other than for trade wars and commercial confrontations between and within states, they do not seem conceptually primed for evaluation of armed interstate conflict impacts or reversing the economic and societal burdens of war in a geographic context. This limits the value of consulting the wisdom of an IFI for understanding the real cost of the current conflagration in the Middle East.

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Cloudy mirrors of regional economic dynamics

Regrettably, the protracted and intense conflict experiences of all polities in the region, first among them Syria, Palestine, and Lebanon but also Egypt, Jordan, and Israel, are not mirrored well – or perhaps not at all – in the world’s go-to source for economic data and opinions, the World Bank Group (WB) and the International Monetary Fund (IMF).

The most recent IMF regional economic outlook for the Middle East, Pakistan, Caucasus, and Central Asia MENAP CCA does cover only four of the polities that Executive has been looking at, and those only partially and in disjointed descriptions. The latter dichotomy starts with definitions. In terms of country groupings, the IMF lists Egypt, Jordan, Lebanon, and Syria (as Syrian Arab Republic) under the sub-category of MENA countries. What most of the world today calls Palestine is labeled WBG by the IMF, for West Bank and Gaza. Israel, on the other hand is not covered in the regional economic outlook at all.

By analytical groupings, Egypt, Jordan, Lebanon, and WBG are listed as oil importing, emerging market and middle-income economies (EM&MIs). Syria, on the other hand, is listed as an oil-importing low-income country (LIC). Lebanon, Syria, and WBG are additionally noted as both fragile and conflict-affected states. For information on Israel, one has to consult another IMF publication, the World Economic Outlook, where the self-declared Jewish and democratic state is found in the category of “other advanced economies”, 17 jurisdictions that are not part of the G7 and Euro areas (but among which Israel is the sole country located in the Middle East).  

Apart from these curious distinctions that fly in the face of geographic and socio-historic realities, the headline data recorded, estimated, and projected on the six polities and their economies are incomplete and inconclusive. Real GDP growth data for 2024, 25, and 26 for Israel can be found in the World Economic Outlook but, under the IMF’s logic, not in the regional economic outlook. Data sets for Jordan and Egypt are available for these three years. However, Syria’s economic fates are not reflected in GDP growth data and these data for Lebanon and WBG are displayed only for 2024. This leaves a void of three data points for Syria and two each for Lebanon and WBG, meaning seven out of eighteen data points, with the additional caveat that forward looking data are uncertain.

Researching correlations of economic and political trends, mutual influences, gaps in regional trade and integration, or differing impacts of armed conflict of differently grouped economies under the IMF lens is far from easy. Counterintuitive to the region’s heavy conflict experience between 2023 and 25, the IMF regional outlook posits that the economic performance of the region has been “generally robust in 2025“ and opens its first of two chapters by reiterating that regional economies have  “shown resilience so far in 2025”, despite global uncertainty and tensions that included “a short-lived” conflict between Israel and Iran in June.

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Uncertainty and risks

The IMF says in its latest regional outlook – first chapter – that “GDP growth in the MENAP region is projected to strengthen in 2025 at a faster pace than anticipated in May”. As for risks, it cites primarily fiscal, monetary, economic and geoeconomic as well as climate risks and policy weaknesses for countries in the entire region. The report mentions, although not in a prominent manner, that geopolitical tensions remain a main risk for regional economies, with a specific acute risk of renewed escalation of the Iran-Israel conflict and the danger that “the unresolved Gaza crisis could undermine regional economic and trade stability to a greater extent than currently assumed in the baseline.”

A second chapter of the regional outlook highlights findings from a spring 2024 regional outlook: that in the MENAP and CCA regions, “output per capita remains, on average, about 10 percent below its pre-conflict trend a decade after the start of a severe conflict”. The chapter seeks to academically add to the discussion of factors that can be drivers of post-conflict recovery and advocates for “macroeconomic stabilization efforts, financing, including international support measures, and structural policies”. The chapter helpfully states that “boosting the chances of a successful post-conflict recovery requires a comprehensive strategy, calibrated to economy-specific circumstances” and cites the importance of further research. 

The IMF’s sedate approach differs from papers by the World Bank that raised the ‘question of Palestine” in December 2024. Decrying the conflict’s “catastrophic impact on the Palestinian economy” the World Bank estimated the GDP contraction in 2024 at 26 percent and said that all sectors in Palestine had been severely affected, “with construction, manufacturing, services, and trade experiencing the most significant declines”. To address the country’s deep economic crisis and avert a socioeconomic collapse and further worsening of poverty “will require several critical and urgent actions from the Palestinian Authority, the government of Israel and the international community.”

Assessments without clear solutions 

A wider assessment of the regional conflict landscape comes from the Armed Conflict Location and Event Data (ACLED) academic project and NGO, although these data offer no more insights into the economics of the conflict and eventual post-conflict economic solutions than the World Bank’s brief reference to Palestine’s national economy.

The intensity of conflict – tracked by ACLED – in 2024 saw Palestine as the polity suffering the largest impact of conflict in the world as analyzed under four categories of deadliness, diffusion, fragmentation, and danger. Syria and Lebanon were ranked in third and seventh place of most-afflicted locations. This ranking shows Syria as being 30 places higher in the ranking of conflict intensity than Israel. Egypt and Jordan were found less affected by further wide margins, at ranks above 70 and 100.

In the organization’s 2025 conflict index, Palestine and Syria were still ranked in first and third position for total conflict exposure. Lebanon dropped out of the top ten most conflict intense counties to a still very high total conflict intensity ranking of 19, Jordan and Israel also dropped further, but Egypt’s ranking indicated a slight increase in conflict intensity. According to ACLED, the conflict profiles of Eastern Mediterranean countries were embedded in a global conflict landscape where “high levels of conflict became the new normal”.

From a statistical analysis perspective, however, the conflict intensity in the region does not translate into a measure of the recent Israeli-Gaza conflagration’s economic dimension and the impairments of national productivity in countries affected by IDF actions. Similarly, the economic repercussions of the latest conflict in Palestine are not reflected in global analyses by the Australia-based Institute’s for Economy and Peace (IEP) which found in the 2025 Global Peace Index that the economic impact of violence across the world was equivalent to 11.6 percent of global economic activity.

IEP, which observes global peacefulness and this year rung the alarm over 17 years of incrementally declining global peacefulness, assesses the economic impact of violence per country based on numerous factors that extend beyond armed conflict impacts. Syria and Palestine are shown as two of the countries with the highest economic cost of violence as share of GDP in 24, stating this cost at 33.97 and 19.42 percent. This perspective, while indicative of the overall economic burden of violence to a polity in purchase-power-parity terms, is of limited utility for assessing the actual cost of the 2023 – 24 war and the October 7, 2023 terror incursion from Gaza into Israel.

Propaganda and war economics

It is undeniable that the propaganda, information warfare, and cybernetic dimension of militaristic and militant opinionating in the latest Middle East conflict involving Israelis and Arabs looms larger than at earlier times of warfare in history. Within the discourses of six polities covered in this report, debates of social constructs and partisan words of mass destruction from genocide to anti-Semitism have been embedding into the minds everywhere in reach of communication technology.

Deep fault lines and towering needs

Measuring and comparing economies in their geographic environments and also in their peer groups is standard practice for entities from the World Bank Group to the World Economic Forum. However, no reports of IFIs and global economic think tanks seem to offer analyses on the long-term cost and opportunity costs of regional conflicts.

Additionally, there were no uniform causes behind economic downturns and ultra-deep recessions in three of the territories. The economy of Gaza, but not of Palestine, was wiped out by bombings and ground intrusions between October 2023 and the October 2025 ceasefire (and the erasure continued in the month after the ceasefire); Palestine in its entirety nonetheless suffered an estimated GDP contraction of 26 percent in 2024.

The neighboring Lebanese economy, which took an estimated $6.5 billion dollar hit in war destructions and damages in 2024 and saw its GDP drop 7.5 percent, suffered its more severe meltdown – cumulatively estimated 38 percent of GDP for three years – starting from 2019 and entirely due to factors that were not prima facie caused by external conflicts. But it furthermore suffered impacts of undetermined magnitude from the peace waged by Israel in 2025. 

The causes of the Syrian meltdown include economic sanctions, devastation from internal conflicts with the militants of the Islamic State (ISIL), and the corrupt politics and oppressive system of Assad dynasty rule from 1971 until December 2024. The need of rebuilding destructed infrastructure and real estate assets that were incurred due to internal strife between 2012 and 2018 was already estimated at $100 to 300 billion (in the Lebanon Economic Vision document of consultancy McKinsey).

The recent World Bank “conservative best estimate” of $216 billion cost of restoring physical assets – infrastructure and building assets – with a cited possible upside margin of another $129 billion, sounds like a safer bet for an analyst without skin in the game than for an imaginary master contractor who would enter a bid for the project.  War impacts on Jordan and Egypt by contrast were indirect and concentrated in indirect impacts on shipping via the Red Sea – to Jordan through the Gulf of Aqaba and for Egypt because of rerouting of vessels away from its Suez Canal.

Impediments to tourism were less severe for both countries than for Palestine, Lebanon, and Israel. Other than that, by the feeble amount of data that are fully transparent, the cost of warfare for Israel was minor in terms of suffered destruction yet economically poignant in terms of economic losses incurred because of military duty obligations of many Israeli citizens and because of ordnance and weapons systems that had to be restocked after their use in defense, retaliatory sorties and punitive air raids directed at Gaza, Lebanon, Iran, Syria, and Yemen. 

Fortunetelling for six polities

The economic future of the six polities is murky with more downside than upside risks for five of them and obfuscated with perceived upside risk for one of them. The cost of economic salvation – that is, the price tag of investments that would elevate Egypt, Syria, Lebanon, Jordan, and Palestine into a higher tier of income, employment, productivity, social safety and ecological sustainability – could range anywhere from one to three times their collective annual GDP estimated for 2024.

In numbers, that means costs of one trillion dollars are entirely in the realm of the economically, socially, and environmentally needed. Investment potentials, preliminary World Bank assessments, and rose-colored national plans suggest that a low-ball estimate of salvatory cost would exceed Syrian and Palestinian GDP each by multiples – estimated $214 billion for Syria and $70 billion for Palestine, versus estimated 2024 GDP values of $22 and 14 billion.

In Jordan and Egypt, current national development ambitions will require, at least, the equivalent of one-time national GDP in 2025, $58 versus 53 billion in Jordan and $400 billion (estimated by observers and consultants) versus $389 billion in Egypt. In Lebanon, the economic rebirth would require about two times to two-and-a-half times GDP of the current production of goods and services (including informal activities), if one assumes that the total price tag would be $80 to $90 billion and de-facto GDP for 2025 is more than $40 billion instead of the internationally cited $25 to 30 billion.

The five polities’ hunger for funding over a decade (or two or more) could be as low as $820 billion. Their real need for investments, however, could well range anywhere from one to 1.5 percent of global GDP, putting the need firmly above one trillion dollars. In this, the region’s fragile state of investment deprivation is not unlike the situation of a starving person who cannot dare to overeat if they want to regain their sustenance. But the source of sustenance – needed investments possibly worth more than a year of national GDP – is uncertain in the best imagination and laden with past failures of mobilizing needed amounts, whether from taxes, international financial institutions, friendly states, private sources, or as hybrid public-private partnerships.  

Moreover, sweeping visions such as the Jordanian and Egyptian ongoing national development concepts have been researched and drawn up in the 2010s, as evident from frequent citations and references to the World Bank Doing Business series and the World Economic Forum’s Global Competitiveness Report and Index. Newer determinants of crucial economic potentials, metrics focusing on factors such as AI readiness and AI governance, are not part of the argumentation for investing in any of the Arab polities under purview. Matter of fact, all geo-economic indexes and rankings, whenever developed, show Israel in decidedly more enviable positions than its neighbors.   

For Israel, the headline development equation is much different. With national GDP of $540 billion according to World Bank open data, the Jewish state has not seen a single year of GDP contractions since 1966, except for the pandemic year of 2020. By any numerical comparison to the regional neighbors, Israel is indeed in a different category of wealth and income, of technology adoption and industrial advancement, and of readiness for the digital age.

In this arithmetic, the economic outcome of the past 80 years is undeniably a zero-sum game, with Israel as the indisputable entry in the win column of the conflict balance sheets, including the balance sheet of the most recent conflagration. The idea of turning this win-lose constellation into a win-win reality of Middle Eastern economic integration in a frame of social, religious, and cultural peace has for the past five decades been pursued with willful blindness for the economic baselines of power. The investment needs for reaching a regional integration offering growth benefits to all its polities  seems still utopian in light of political and security requirements.

The other option, that the obvious win-lose status quo is hiding a lose-lose future reality of immeasurable cultural and mental health cost, plus societal, climate and environmental repercussions that are to the detriment of the entire capitalist civilization is nothing but a speculation void of appeal under the proposition of reciprocal altruism. Similarly speculative is the idea that the changes of automation, where people leave the thinking to the machines for their superior processors, and further digitization will reverse the curse of this Faustian civilization’s and its protagonists’ unending search for knowledge, money, and power into a fascination with and quest for spirit, compassion, sustainability, and reciprocal altruism.  

In Gaza’s hospitals, the daily struggle for life is inseparable from the fight to manage scarce resources and staff numbers, and to find innovative solutions within impossible constraints. Doctors, nurses, paramedics and support staff are compelled to act simultaneously as caregivers, administrators and problem-solvers in an environment where every decision is weighted by both clinical urgency and economic limitation.

A healthcare system tested to its limits

According to a situation report released in mid-October 2025 by The United Nations’ Office for the Coordination of Humanitarian Affairs, 14 out of Gaza’s 36 hospitals, 10 out of 16 field hospitals and 64 out of 181 primary healthcare centres are only partially functional. Private hospitals have closed and public hospitals operate at less than 30 percent of their capacity. By the end of September 2025, Gaza’s Ministry of Health reported that 55 percent of essential medicine, 66 percent of essential consumables and 68 percent of laboratory reagents were completely out of stock. Despite the latest ceasefire, restrictions on the amount of aid trucks crossing the border—Al Jazeera reported that only half of the necessary trucks were permitted entrance as of October 15^th, and the ones entering did not carry many essential supplies—mean that medical supplies are still not reaching hospitals.

28-year-old Dr. Ali Mohammed Ziyad Al-Batta is a fourth-year urology doctor at Al Nasser Complex in South Gaza. As hundreds of thousands of Gazans were displaced from their homes in the north to the south of the Strip over the course of the two-year war, hospitals like Al Nasser Complex became a lifeline to more patients than they could accommodate. Operating the Khan Younis-based hospital became increasingly difficult amid overcrowding and a shortage of medical supplies. Doctors found themselves having to ration out pain relief medication.

Al-Batta says the announcement of a ceasefire has done little to change the disastrous circumstances he and his colleagues face every day at the hospital.

“It’s been two years of us trying to serve our people with the simplest of means,” he says. “The number of those with long-term injuries remains high; these patients require follow-up and restorative surgeries. Currently, they are waiting for the Rafah border to reopen in order to leave Gaza to receive medical treatment. For many of Gaza’s sick and injured, Rafah border has become a final glimmer of hope.”

Unpaid healthcare workers

Gaza’s economic collapse—UNCTAD, the UN’s trade and development agency, reported an 81 percent contraction in the last quarter of 2023 alone—compounds the challenges hospitals and healthcare facilities face. Dr Al-Batta is among those that have chosen to volunteer their services to preserve life and prevent the healthcare system from complete annihilation. “It has been two years since I was last paid a salary,” he says.

30-year-old nurse Khalid Abu Hasnain who works in the Emergency Department at Al Aqsa Martyrs’ Hospital in Deir El Balah, Central Gaza, is one of the luckier ones. He gets paid a small stipend of $300 a month, despite working shifts that exceed 12 hours. Responsible for both his own daughter and his orphaned nieces and nephews, Abu Hasnain says the money is barely enough to buy milk and does not cover his travel expenses, but he keeps going.

“The war has destroyed everything — homes, families, and futures — even our healthcare sector,” he says. “Doctors and nurses are working without equipment, without salaries and without rest. Yet, we are trying to prove that humanity does not die, even amid the rubble. We can’t abandon the patients.”

Making medical supplies stretch

With the limited availability and flow of cash, healthcare workers have created an informal health economy, sharing and bartering medical supplies, recycling disposables and sharing resources across hospital departments. In some instances, doctors report having to dilute medication to make supplies stretch. 38-year-old Dr. Nadia Hamdan works as a gynaecologist at Al-Shifa Medical Complex in North Gaza. Before the war, Al Shifa Medical Complex in the Rimal neighborhood of Gaza City was Gaza’s largest hospital. After suffering repeated bombing and a ground incursion which left it half-ruined, the hospital now runs limited services, including a makeshift outpatients department and emergency ward.

On top of treating her female patients, Dr Hamdan says she has the additional burden of finding new ways to be resourceful with the limited medical supplies and equipment on offer. Being able to just practice medicine is now a luxury.

 “Oxygen runs out, sterile gauze is absent and essential medications are limited,” she says. “We disinfect and reuse instruments because electricity is unreliable and the generator cannot power all equipment. Every patient encounter is also a management exercise — we ration, prioritize and improvise constantly.”

Harbouring innovation and technology

Adapting through the use of innovation and technology is essential for the survival of Gaza’s fragile healthcare system. Solar panels, improvised incubators and remote training reduce costs and sustain operations. Medical students assist under supervision and NGOs provide healthcare workers with workshops on resilience, resource management and multi-role competencies. Doctors and healthcare workers utilise social media and digital platforms to carry out consultations or fundraising efforts.

“We cannot wait for suppliers,” says Ahmed Barakat, a bio medical technician at the European Hospital in South Gaza. “Spare parts are unavailable, so we improvise. Sometimes we use a 3D printer to print replacement parts, or we repurpose older equipment or repair machinery with locally sourced materials. Each solution saves money and prevents further strain on the health system.”

Hospitals struggling to operate in the absence of fuel and electricity

Before the war, 57-year-old Dr Naji Al-Qarshli used to work as an obstetrician and gynecologist at Kamal Adwan Hospital in Beit Lahia, North Gaza. He was displaced to the west of North Gaza after the area he lived in was completely destroyed, where he now works at the Patient Friend’s Benevolent Society Hospital.

Patient Friend’s Benevolent Society Hospital has now become the Gaza Strip’s main maternity and pediatric hospital according to an interview that Medical Aid for Palestinians conducted with its medical director in March of 2025. Dr Al-Qarshli and his colleagues work tirelessly to treat a neverending stream of women who go there to give birth. It is also one of only a few remaining hospitals in Gaza to have a NICU (neonatal intensive care unit). At the height of the war, Dr Al-Qarshli says maternity wards were being transformed into multi-use emergency rooms for the injured, alongside those who had come to give birth.

“When the electricity cut, we delivered babies by the light of our cell phones, searching for sterile gloves as if we were hunting for treasure,” he shares. “Our psychological state deteriorated, we lost a lot of weight and we were treating patients in a state of panic. Many of our pregnant patients arrived to the hospital after hours of walking, having been displaced from their homes. We were trying to preserve the lives of mothers and fetuses amidst an unforgiving reality.”

During a neonatal emergency, Barakat of European Hospital recalls being among staff that had to manually ventilate infants in order to keep them alive because the generator had stopped working.

 “At 3am one morning, an incubator failed. We manually ventilated infants before the generator died. Hospitals rely on ten hours of full power daily; at night, many units become non-functional, impacting both health outcomes and operational budgets.”

From full-time gynecologist to volunteer medic: How Gaza’s war forced me to adapt

During the past six months, I personally lived and worked across North and South Gaza, experiencing both displacement and professional upheaval. My private gynaecology clinic was destroyed in the bombardment. I pivoted to volunteer work in public hospitals and field clinics, where demand exceeded available resources.

To reach women unable to travel to hospitals, I launched remote consultations via social media platforms, providing guidance and follow-up care. This digital approach functioned as both a clinical lifeline and an economic solution, extending limited resources without adding infrastructure costs.

Recognizing the ongoing material and financial scarcity, I established a free medical tent supported by online fundraising campaigns. Donations funded essential medications, medical supplies and operational logistics, creating a micro-healthcare economy sustained by community contributions and volunteer hours.

Maintaining services amid destroyed infrastructure, unpaid staff and scarce resources demanded strategic allocation, financial ingenuity and creative problem-solving. Through volunteer coordination, digital outreach and fundraising, I was able to continue delivering critical care to pregnant and nursing women, mitigating economic loss and sustaining the fragile healthcare ecosystem in Gaza.

Economic resilience at the heart of Gaza’s healthcare system

Gaza’s healthcare system today illustrates the inseparable link between economic resilience and medical care. Each ward, each procedure and each hour worked by a volunteer is not only a clinical intervention but also a strategic economic decision. Hospitals operate as micro-economies, where budgeting, resource allocation and improvisation determine survival both for patients and for the system itself.

Sustaining Gaza’s healthcare requires more than humanitarian aid. It demands structured economic planning, local manufacturing and coordinated community support. Investing in staff, creating emergency financial reserves and training multi-skilled personnel not only secures health outcomes but also strengthens the broader economy.

Ultimately, the story of Gaza’s healthcare system is a story of human ingenuity at the intersection of crisis, health and economy. The resilience demonstrated by healthcare workers, volunteers and communities proves in my experience of the past three years, that even amidst profound economic collapse, strategic innovation and human dedication can sustain life, preserve livelihoods and build a foundation for a more robust, self-reliant healthcare system.

In the attempt to assess the regional economic reverberations echoing out from two years of conflict triggered on October 7, 2023, Syria stands apart as somewhat of an outlier. Given that in the year 2023, the country was not only twelve years deep in civil conflict but had also become a battleground by proxy for battling external nations, it is nearly impossible to separate direct macro-economic impacts of the Gaza war from the economic shocks of over a decade of conflict, out-migration, and a crippling international sanctions regime.

The event that snowballed into far more impactful economic changes, namely the fall of the Bashar al Assad regime, the rise of al- Nusra Front founder and Hay’at Tahrir al Sham leader Abu Mohammad Jolani-turned-President Ahmad al Sharaa, and the partial lifting of the 2019 Caesar Act Sanctions by the US, is separate from but certainly not unrelated to the regional fallout post- October 7. Syria’s astonishing regime shift was spurred by shifting internal and external political conditions. But attempting to trace the steps of which action was orchestrated by which party on which timeline, and as a result of which other event leads one quickly into mirky territory that is speculative at best and can veer towards conspiracy at worst. What is clear is that the weakening of Hezbollah during its war with Israel, particularly in Israel’s open war phase on alleged Hezbollah targets in Lebanon from September-November 2024, weakened the Syrian regime and created opportunity for Assad’s ousting and the fall of his regime during an eleven-day period that culminated on December 8, 2025.

On that day, eleven days after a ceasefire was declared in Lebanon, Israel broke the 1974 Disengagement Agreement and invaded southern Syria from the occupied Golan Heights in a seizure dubbed by Netanyahu as a “temporary buffer zone.” The expanded occupied territory includes the strategic high point of Mount Hermon, or Jabal al Sheikh, which also supplies water to Damascus via the Fijeh spring and Barada river. Both are strategic freshwater sources that moreover dropped to critical lows due to a 2024 drought, resulting in detrimental effects for 70 percent of Damascus water according to an August 2025 drought report by the International Federation of the Red Cross. Nonetheless, the restitution of Jabal al Sheikh to Syrian control seems not to be intended. On November 26, 2025, Israeli Minister of Defense, Yisrael Katz, stated that, “We will not withdraw from Mount Hermon and we will not leave Syria,” and the Israeli prime minister reiterated in February 2025 that “we will not allow Syrian army forces to enter the region south of Damascus.” On top of its seizure of Damascus’ main water source in course of its presumed fortification of its security and economic positions, Israel has been conducting a one-sided air campaign against targets in Syria, which it intensified on December 9, 2025, with approximately 350 airstrikes over a 48-hour period, devastating strategic infrastructure, destroying weapons stockpiles, airbases, missile depots, and naval facilities.

No way to go but up?

Syria’s post-conflict economic outlook is defined by a very weak starting point and a narrow path to recovery. After an estimated 1.5 percent contraction in 2024, Gross National Product (GDP) is projected to grow by just 1 percent in 2025, according to the World Bank’s June 2025 macro-fiscal assessment. This growth is just a drop in the bucket in needing to offset a cumulative GDP loss exceeding 50 percent since 2010. According to this same report, extreme poverty is rising, public services continue to deteriorate, and Gross National Income (GNI) per capita has fallen to roughly $830 USD, placing Syria among the world’s poorest economies.

Although the World Bank estimates a GDP loss of about $800 billion USD over a decade of conflict, the United Nations Development Programme (UNDP)’s February 2025 report on the impact of conflict in Syria estimated an economic and financial loss of $923 billion USD by the end of 2024. The World Bank’s “conservative” estimate for reconstruction costs accumulated between 2014 and 2024 comes to $216 billion USD. The fiscal position is deeply strained: budget deficits hover around 6 percent of GDP and public revenues remain depressed. External public debt, which is unreported but owed primarily to Iran and Russia, has climbed to over 100 percent of GDP, leaving the state with almost no fiscal space. In May 2025, Saudi Arabia and Qatar paid off Syria’s $15.5 million USD outstanding debt to the World Bank, prompting the global finance institution to recommence engagement with Syria. In June 2025, the World Bank approved a $146 million USD grant to rehabilitate Syria’s electricity network.

Entrenched informality, continued security risks, and war-era illicit networks such as the addictive drug trade hinder the revival of formal economic activity and deter private investment. The transitional regime led by President Ahmed al Sharaa has brought both economic optimism as well as a good deal of uncertainty and fear.

Sprees of violent clashes—such as the bloody March 2025 clashes in Latakia between Alawite populations and Sharaa’s transitional government forces that killed around 2000, or the June 2025 suicide bombing at a Damascus church that killed 25—have called into question whether the regime can bring about a positive new chapter for all Syrians. The April 2025 clashes between Syrian forces and members of the Druze community outside Damascus—ignited by what later seemed to be a misunderstanding—and the July 2025 clashes in Latakia between Bedouin tribes, Syrian forces and Druze which resulted in the deaths of over 1000 as reported by the UK-based Syrian Observatory for Human Rights, many of them Druze civilians, were seized as a intervention pretext by Israel, prompting air strikes and statements justifying continued occupation and retaliation.

 In May 2025, US President Donald Trump issued a waiver that eased the sanctions imposed by the Caesar Syria Civilian Protection Act of 2019 (which he had signed into law during his first term), and then extended the same waiver during Sharaa’s November 2025 visit to Washington. International investors—particularly multilateral partnerships—have shown a cautious optimism towards embarking on infrastructure rehabilitation projects, while the return of displaced Syrians could expand the labor force and boost domestic consumption. The Syria Report, an economic database for Syria, reported in November 2025 that Syrian Minister of Finance Yisr Barnieh predicts a 12 to 15 percent GDP growth in the next few years.

However, without political stabilization, large-scale reconstruction funding, and structural reforms, the projected recovery will remain shallow, and per-capita income is unlikely to rise meaningfully in the medium term.

The human toll of Israeli escalations and the “Campaign Between Wars”

Since the beginning of the war on Gaza, Israel has escalated their military aggressions in Syria, turning it into a key proxy battleground of Israeli-Iranian confrontation. According to the Syrian Observatory for Human Rights (SOHR), Israel has attacked Syria 104 times between October 10, 2023 and August 15, 2024, many of which targeted military interests linked to Iran and Lebanon-based militias. The attacks targeted military research centers, weapon storages, and Iranian bases, during which 259 combatants were killed and 147 were injured, mostly Iranian-backed Syrian combatants and members of Lebanese resistance group Hezbollah.

One of the major attacks towards the end of 2024 destroyed a missile production factory in Masyaf, on September 8, with 27 reported casualties. The second severe Israeli intrusion in this period was the Palmyra airstrike on November 20, with a recorded death toll of 108 civilians. In July 2025, Israel targeted the Syrian Defense Ministry headquarters in Damascus. Cumulatively, SOHR reported a total of 95 Israeli strikes in Syria from the beginning of 2025 through August, and by November 2025, this number has reached over 1000. Israel’s latest attack as of this writing killed 13 in Beit Jinn on November 28 in an attack purportedly targeting Jamaa al-Islamiya, the Lebanese branch of the Muslim brotherhood, which itself claims is not active outside Lebanon.

Israel’s strategic doctrine of conducting limited targeted operations in Syria, instead of a full-scale war is a part of their well-documented war campaign Mivtzot Bein-Milhamot (MABAM), translated from Hebrew to the ‘campaign between the wars’. Through this strategy of covert and overt operations that hover below the level of full-scale war, Israel tries to degrade the capabilities of its adversaries by attacking targets viewed as operational or military threats.

Even though this campaign reflects a strategy of selected attacks, its economic implications have been major on the economy, disrupting several already fragile sectors.

Given the 2025 convergence of a new, and in economic terms still little-tested government, removal of sanctions that had been crippling the Syrian real economy and legal economy, and a rush of development contracts in critical energy, transport, and trade infrastructure that cannot yet be assessed for their efficacy and resistance to corruption, other distortions and disruptions by armed conflict, outlooks for legitimate developments of strategic economic sectors are mired in uncertainty. Sectors that appear crucial for national development are in the short to medium term agriculture and legal agro-industry, energy, transport, and infrastructure. In the medium to longer term, critical assets to be developed are human capital – through repatriation but more fundamentally through new educational institutions, and digital capacities.

The creation of a tech sector and digital infrastructure, named by Abdulsalam Haykal, the Minister of Communications and Information Technology, Syria’s “Digital Silk Road,” would according to media reports from November 2025 mean deploying a 4,500-kilometer network of fiber-optic lines and submarine cables seeking to establish the country as the Middle East’s alternative international data corridor. The national backbone cost alone is estimated by Haykal at up to $500 million. 

No longer Captagon central

For well over a decade, Syrian export revenues have been boosted by, and in recent years largely consisted of, illegal drugs chemically produced from easy-to-synthesize, cheap components. Latest after the beginning of the civil war in Syria, sanctions and economic isolation created a vacuum that fostered the production of fenethylline, a psychostimulant drug that is widely prohibited and best known by the discontinued brand name Captagon. Consumption and production is concentrated in the Middle East region, with major consumption in countries that get supplied by Syrian producers, some of whom were reportedly linked to the state during the rule of Bashar Al Assad.

According to the World Bank’s 2024 report, the total market value of Captagon was between USD 1.9 billion to USD 5.6 billion a year, almost equal to the country’s acknowledged GDP in 2023. Being a minor illegal drug business turned into a pillar of Syria’s Bashar al-Assad war economy, and the production and distribution of Captagon generated USD 1.8 billion a year in revenue, the report states.

However, after the fall of the Assad regime, the reality around Syria’s Captagon empire changed drastically. In June 2025 the new Interior Minister, Anas Khattab, stated that all labs that were responsible for producing Captagon were confiscated and permanently seized. However, Syrian local media reports signal that the trade has not fully ended, but is still actively operating in northern Syria, in the areas that are outside full central control, indicating that it has been fragmented and decentralized rather than eliminated entirely. In March 2025, Iraqi authorities published a statement claiming to have confiscated 1.1 tons of Captagon smuggled into Iraq from Syria through Turkiye.

Thus, while weakened and losing its prominent status as the major former regime-funder, production is still continuing in areas out of state control and smuggling routes remain. Agricultural production and agro-industry, the historic backbone of Syria’s real economy and key sector for growth of legal growth and exports, are targeted for rebuilding after having been massively impaired in more than a decade of internal violence and displacement.    

Energy sector lit up by attacks and investments

The energy sector, including production of electricity, is strategic for Syrian reconstruction. After more than 14 years of civil war, internal conflicts, and Israeli aggressions, Syria’s electricity network has collapsed, with most energy infrastructure left in ruins. Syria produces around 2,200 megawatts (MW) of electricity, though its electricity needs come to about 7,000 MW. This has left millions of families dependent on expensive private generators for their essential electricity needs.

In the World Bank’s 2017 ‘The Toll of War’ report, it was stated that nearly two-thirds of water treatment plants and half of all pumping stations had been destroyed. The report proves that the water infrastructure in Syria was already fragile during the civil war, and completely collapsed in recent years. In 2025, the United Nations Development Programme (UNPD) reported that 50 percent of the country’s entire infrastructure has been “destroyed and rendered dysfunctional” due to internal conflicts and Israeli attacks on water sites.

Ghassan Al-Zamel, Syria’s minister of electricity from 2022 to 24, estimated the sector as having suffered direct losses of $40 billion and indirect losses at $80 billion. More than half of the country’s electrical grid has been rendered inoperative through the continuous destruction of power plants and transmission lines. The crisis was intensified by gas and fuel shortages. “The Ministry requires 23 million cubic meters of gas daily but receives only 6.5 million,” he said in a May 2024 interview with Arabic News. As of 2025, major assets including the Alouk Water Station and Tishreen Dam were reported out of service, thus causing a great disruption to water supply.

Having consolidated the electricity ministry and two other ministries into a single entity, the Ministry of Energy, in March of 2025, the Syrian government signed a $7 billion USD electricity deal with a consortium of companies from Qatar, Turkiye, and the US. According to the Ministry of Energy, the deal will see the development of four combined-cycle gas turbine power plants in Deir al Zur, Homs, and Hama, plus a 1000 megawatts solar power project in southern Syria. The agreement is expected to result in 5000 megawatts of capacity for generating electricity from natural gas (80 percent) and solar energy. The following month, the Syria Electricity Emergency Project, the World Bank’s $146 million USD project aimed at rebuilding Syria’s electricity networks and rehabilitating connectivity with Turkiye and Jordan, was approved.

Extraction of oil and gas is a part of Syria’s strategic energy sector that, due to resource degradation or exhaustion, had been diminishing in value long before the country’s internal unrest erupted into civil war. In 2010, before the start of the civil war, the US Energy Information Administration had reported that Syria’s oil and gas sectors had accounted for a fourth of its revenues. From 2010 until 2024, Syria’s oil production dropped by over 75 percent, according to the World Bank’s 2024 fiscal report.

But new signs of life in Syria’s oil production—and international entities who want a share in it—are evident in 2025. According to media reports from November, the Ministry of Energy is stepping up efforts to attract foreign investment, holding discussions with U.S. energy giant Chevron and signing Memorandums of Understanding with ConocoPhillips and US-based gas and Renewable Energy specialist company Novaterra Energy to both rehabilitate existing gas assets and explore new fields. The outreach extends beyond U.S. firms: UAE-based Dana Gas has also signed an MoU for natural-gas exploration, while Serbia’s Elixir Group is positioning itself to enter the phosphate sector. Taken together, these moves reflect Damascus’ push to revive its weakened extractives industry amid prolonged infrastructure damage and ongoing economic strain.

 New openings: Tartous Port and Damascus Airport

The sector of aerial and maritime transport is another vital component of Syria’s recovery and development strategy. Even though the rapid regime change caused a fragmented political landscape in the country, it opened new investment opportunities with the goal of stabilizing vital services that were disrupted during times of conflict.

One of these deals is that of the Tartous Port, a deal the Government of Dubai media office called ‘a major milestone’. The 30-year concession deal between Syria and UAE-based company DP World, includes a planned USD 800 million investment, one of the largest investments in Syria in recent years. The agreement was signed in July and DP World commenced activity in November with the transfer of a tugboat.

The country’s other gateway of maritime transport, Latakia, has in May 2025 seen a partnership agreement between French (with Syrian roots) shipping giant CMA CGM and the Syrian state about developing the container terminal in this port that is located some 90 kilometers to the north of Tartous. The agreement, consisting of an initial €30 million investment and a quick follow-up commitment of €200 million agreed on in August, wrote further news through a 20 percent buy-in of Abu Dhabi-owned AD Port. The company will have a 30-year concession as operator of the Latakia container terminal.

Through an international consortium led by UCC Holding, a Qatari-based electricity, concessions and construction company, the General Authority of Civil Aviation in the Syrian Arab Republic signed a $4 billion USD contract in August 2025 for the development, construction, and expansion of the Damascus International Airport. With the participation of Cengiz Insaat of Turkey and Assets Investments of the US, the airport’s capacity is projected to increase to 31 million passengers annually, as reported by online trade publication SaudiGulf Projects. In addition to that, the investment will potentially provide more than 90,000 direct and indirect job opportunities in the fields of construction, engineering, logistic trade, air operations, and hospitality.

Return migration and a slow comeback for education

During the civil war, 6.1 million Syrians fled from the Assad regime according to a December 2024 UNHCR report, while as of 2025, 7.4 million remain internally displaced. Furthermore, the fall of the regime in December 2024, marks a qualitative shift: hundreds of thousands to a million of Syrians have returned to Syria since December 2024. According to UNHCR’s Flash Update from November 8^th, 2025, 1.2 million Syrians have returned from outside the country since December 2024, mostly from Turkiye, Lebanon and Jordan, while over 1.9 million internally displaced Syrians have returned to their “places of origin or intended return.” The main cities of return were Aleppo, Damascus, rural Damascus, and Idlib.

In another report conducted by UNHCR summarizing refugee movements in June 2025, records that there have been new arrivals from Syria to Lebanon, indicating there has been waves of migration in both directions, in part due to the waves of violence including the March 2025 Latakia massacres of Syrian Alawites.

Reintegration of returning refugees and exiles is a humongous task that is crucial for the infusion of new skills and vigor into the Syrian economy. The bigger challenge, however, is reengineering and developing educational infrastructures and institutions. In 2025, Syria’s education sector is straining under the compounded weight of infrastructure loss, displacement, and chronic underinvestment. An estimated 4.2 million students returned to classrooms for the 2025–2026 school year, according to reporting on nationwide enrollment trends, yet this recovery masks the scale of structural damage.

Of roughly 19,400 schools that existed before the war, around 7,900 remain partially or completely destroyed, leaving nearly 40 percent of educational facilities unusable. UNICEF estimates that 2.4 million school-age children are still out of school, a figure that underscores the depth of the learning crisis. Despite these gaps, UN agencies have expanded emergency education responses: UNICEF reports supporting 458,000 children in 2025 through formal schooling, accelerated learning, early childhood programs, and catch-up initiatives, while UNESCO training programs have reached more than 600 teachers and school leaders to improve school safety and inclusivity. The result is a sector showing signs of reactivation but still defined by uneven access, inadequate infrastructure, and heavy dependence on international support.

185,000 square kilometers of guarded optimism

Syria’s new chapter is unfolding under extraordinary strain. The fall of the Assad regime created openings for investment, reconstruction, and a reshaping of state institutions, yet these opportunities are repeatedly undercut by persistent external attacks and repeated internal clashes, fragmented governance, and the enduring weight of economic collapse. First-year achievements of the new Damascene government include diplomatic breakthroughs with Arab partner countries, Europe, and the US. First-year cooperation and investment agreements, however, will have to prove their resilience to unfavorable terms of public-private partnerships and multi-decade operator concessions, not to mention the exorbitant challenge of activating international investment and financial lifelines. Whether Syria can shift from survival to genuine reconstruction depends not only on political stabilization and sustained external support, but on its ability to rebuild public trust, restore basic services, and integrate millions of displaced Syrians back into an economy that has been hollowed out for more than a decade.

This analysis was written as part of a Special Report on the repercussions of war across six polities from October 7^th, 2023-December 2025

Israel’s war on Gaza is a geopolitical existential catastrophe, with 71,266 Palestinians in Gaza and 1,671 Israelis reported killed in less than three years as of December 2025 according to Humanitarian Situation Update #351 from the United Nation’s Office for the Coordination of Humanitarian Affairs (OCHA). Additionally, the November 2025 Situation Report from the United Nations Relief and Works Agency for Palestinian Refugees in the Near East (UNWRA) documents a total of 1,048 Palestinians killed in the West Bank since October 2023.

Since October 7, 2023, the high-cost war has significantly impacted Israel’s economy without causing excessive rupture (it was still listed as the Organisation for Economic Cooperation and Development [OECD]’s third best economy in 2025 by The Economist as reported by the UK journal Globes) while completely decimating that of Palestine. While the International Court of Justice ruled in January 2024 that it was “plausible” that Israel was enacting genocide, the United Nation (UN)’s Independent International Commission of Inquiry concluded in a September 2025 report that Israel has committed and continues to commit genocide against Palestinians in the Gaza strip, which the 1948 genocide convention defines as “the intent to destroy, in whole or in part, a national, ethnical, racial or religious group.”The Israeli government maintains that it is defending itself against the attacks that took the lives of around 1,200 Israelis on October 7^th, 2023.

A non-crippling macro blow

The Gaza war precipitated a pronounced decline in the economy of both polities, although the consequences are far from comparable between the two. At the end of 2025, Israel is experiencing significant wartime disruption to economic activity that is still accompanied by economic growth: According to IMF’s World Economic Outlook data for 2025, GDP is projected at $580 billion, with inflation at 3.2 percent and real growth rebounding to 2.5 percent in 2025 and expected to reach 3.9 in 2026 compared to that of 2024 which was 1 percent, the lowest in two decades. The Bank of Israel’s April 2025 forecast expected GDP to expand 3.5 percent in 2025 and roughly 4.0 percent in 2026, reflecting a rebound in private consumption and investment amid lingering conflict risks.

The human death toll has reached at least 1,671 civilians and soldiers, most of whom were killed during Hamas’ indiscriminate attacks on October 7^th, as well as over 8,000 purportedly injured during the 3-year span. Towards the end of October 2023, Israeli Minister of Finance Bezalel Smotrich estimated per diem costs of war at around $260 million per day, a number which has increased dramatically as the scope, intensity, and fronts of the war—or wars—have expanded at numerous points within the three-year period. On May 30^th, 2024, Amir Yaron, the governor of Israel’s central bank, said that defense and civilian costs of the war on Gaza war would reach $68 billion by 2025, a figure that still does not reflect the total economic cost of war on many fronts.

Behind those numbers is a story of a state that has been through a financially burdensome war, and yet is still growing. Perhaps the largest factor of Israeli economic resilience is its backing by the United States politically and militarily with at least USD 21.7 billion between October 2023 and September 2025, according to an October 2025 report released by US think tank Quincy Institute for Responsible Statecraft and Brown University’s Cost of War Project. The report notes that this number does not include the “tens of billions of dollars in arms sales agreements that have been committed for weapons and services” yet to be delivered. However, even though these figures imply a slow macroeconomic recovery, it is crucial to note that it is far from an organic growth, but rather one driven by government and defense spending, making this growth relatively unsustainable. Although the economy in Israel did not face collapse due primarily to the growth of its tech sector, the war on Gaza was expensive enough to risk medium-term economic destabilization and disparities between the sectors with many of them declining drastically, due to heavy military and fiscal war-time expenses.

The balance sheet of occupation

As the ICJ and the UN has emphasized throughout the course of the war, there have been countless breaches of International and Humanitarian law by Israel that mount to a high economic and political price. The Stockholm International Peace Research Institute (SIPRI), an international entity dedicated to compiling conflict and arms expenditure data, reported in April 2025 that the “global military burden,” defined as military expenditure’s share of GDP, increased to 2.5 percent in 2024. For Israel, military spending jumped by 65 percent to reach $46.5 billion in 2024, an 8.8 percent share of GDP which SIPRI notes as “the steepest annual increase since the Six-Day War in 1976.”

In March 2025, Bank of Israel (BOI)’s Amir Yaron claimed in a Jerusalem press conference that “the war once again is a testament to the crucial importance of a relatively low public debt-to-GDP ratio for the economy’s resilience to shocks”. Yet the public debt in Israel has reached almost 71 percent of GDP, with 5 percent deficit, as estimated by the BOI.

During war, displacement becomes an inherent reality for many, and an expensive one. A large magnitude of the direct fiscal expenditure of the government is the compensation and income replacement of more than 300,000 Israeli reservists that mobilized since the beginning of the war. The government also spends on sheltering and feeding of soldiers, which draws the figure close to 600 million shekel a day (USD 158 million), according to the Ministry of Finance. The displacements of these reservists also create a gap in the labor forces in their respective industries, which disrupt several production lines. The expected military budget for 2025 that was announced in March 2024, according to the Ministry of Defense, is 118 billion shekels (USD 31 billion), twice the one allocated for 2023. These numbers will not only enhance military and security sectors but will also include several budget cuts in other sectors that will ultimately have a direct effect in the general economic growth.

In addition to compensating reservists, Israel also paid compensation for around 60,000 of the northern residents evacuated due to the Israel-Hezbollah war and around 164,000 evacuees in the south due to the Gaza war. Although the total amount of displaced residents in the north exceeded the 60,0000 evacuees in the north and around 164,000 evacuees in the south, those officially evacuated were provided with living assistance, rent, and compensation for damages and losses in business revenues via the Israel Tax Authority. Additionally, incentives were provided for residents to return to their former places of work.

The cracks in construction

The war on Gaza has had significant spillover effects on the Israeli construction sector, with residential construction among the most affected segments. Before assessing the scale and nature of these losses, it is important to situate the industry within its broader structural and political context. The Israeli government has continued to allocate substantial funds toward settlement expansion and infrastructure in the occupied West Bank as part of the 2025 fiscal package and related multi-year plans. In July 2025, the government approved 918 million shekels (about $275 million) specifically for settlement infrastructure projects —a decision presented to the Knesset Finance Committee by Transportation Minister Miri Regev and Finance Minister Bezalel Smotrich. Moreover, in December 2025, Finance Minister Smotrich earmarked a broader 2.7 billion-shekel (approximately $843 million) plan over the next five years to expand and enhance settlement communities, infrastructure, land registration, and associated services beyond the Green Line — a package detailed by Israeli outlets based on official budget directives and statements from Smotrich’s office. By the end of 2024, the Israeli Yesha Council reported that the settler population had surpassed 500,000. This activity takes place in territory that the International Court of Justice, in its advisory opinion issued on 19 July 2024, determined to be under an unlawful occupation.

While the construction sector did not experience a full collapse following the outbreak of the war, it was significantly affected by labor shortages. A primary factor was the sharp reduction in the availability of Palestinian workers, following an October 2023 decision by the Israeli government to restrict their entry into Israel and to close crossings from the occupied West Bank. This disruption resulted in an acute manpower shortfall. In December 2023, Israel’s finance minister estimated daily economic losses at approximately USD 830 million, underscoring the sector’s dependence on Palestinian labor. Since the start of the war, numerous construction sites and residential projects have been temporarily suspended or closed, citing security considerations and the reallocation of resources toward defense-related needs. According to Israel’s Central Bureau of Statistics, by the first quarter of 2024, 41 percent of housing construction sites in Tel Aviv were inactive. Despite continued investor interest premised on Israel’s economic resilience, elevated levels of security-related and regulatory uncertainty have constrained real estate development and delayed investment decisions.

Turbulence in tourism

Travel to Israel declined sharply following the outbreak of the war on Gaza, as heightened security risks, regional instability, and international travel advisories weighed heavily on tourism demand. In parallel, Israel’s global image has come under increased scrutiny amid the conduct of the war, contributing to reputational effects that may have further discouraged discretionary travel. The Israeli Ministry of Tourism reported a 90 percent year-on-year decline in international tourist arrivals in 2024, with arrivals falling to approximately 880,000, down from 2.95 million in 2023—levels not recorded in more than a decade.

The contraction in inbound tourism significantly reduced revenues across the broader hospitality ecosystem, including airlines serving Israel, hotels, and leisure facilities. According to the Ministry of Tourism, cumulative losses in the tourism sector reached an estimated USD 3.4 billion by the end of 2024. While domestic tourism activity has partially mitigated the downturn, its capacity to stabilize the sector remains limited and remains highly contingent on developments in the regional security and diplomatic environment.

The tech sector savior

The above sections have established that the economy in Israel remains resilient. One of the main drivers for this resilience is the tech sector. According to the Israeli Innovation Authority (IIA), the tech sector accounted for almost 20 percent of GDP as of 2023 with an output of USD 85 billion a year, contributing to over half of the country’s exports. This economic endurance has brought Google, Microsoft, and Amazon to establish research and development centers in Israel located in Tel Aviv and Haifa over the past decade. The sector, which is a cornerstone of the Israeli economy, has a significant role in the global innovation landscape for its advanced manufacturing, research, and development worldwide.

Even though the sector remains standing on solid ground, the war on Gaza has slowed down its growth due to work force depletion, slow investment and formation of startups, in addition to the hesitation of the international market. In 2022, there were 508,440 employees that actively worked in the technology sector in Israel. The IIA noted that this number fell to 390,847 employees in 2024 after the beginning of the war on Gaza. Nonetheless, as mentioned above, the sector, whose main components are cybersecurity, AI, medical technology, and fintech accounted for almost 20 percent of GDP before the war, a figure that has dropped to reach 17 percent of GDP in 2024.

The tech sector might be bleeding from one end, but it is certainly also blooming from another. Despite a decrease in investments, it is important to note that during 2025, Israeli tech companies have experienced an exceptionally strong mergers & acquisitions market, reaching USD 71 billion, five times that of 2024, according to Avi Hasson, CEO of Startup Nation Central in a May 2025 statement: “We are seeing fewer rounds, but at record sizes, signaling confidence in scale-ready companies. At the same time, global buyers are making some of the boldest bets we’ve ever seen on Israeli tech, especially in cybersecurity.” The Israeli government has worked hard on its national and international cybersecurity tools, many of which are used to support propaganda and create influence campaigns.

The cost of a makeover campaign

The United Nations’ recognition of Israel’s war on Gaza as a genocide, with the killing of over 70,000 Palestinians in Gaza and the damage or total destruction of 92 percent of all residential buildings in Gaza, according to a UN estimate as of April 2025, has negatively impacted Israel’s global standing. In an effort to bolster its reputation at home and aboard, Israel has invested a significant amount on propaganda to help relieve the economic isolation and reputational risks the country faces. In late 2024 and early 2025, the Israeli government approved a significant increase in its “hasbara” budget (which translates from Hebrew to “explanation”), allocating an additional $150 million (approximately NIS 545 million) to the Foreign Ministry for these efforts. This amount represents a more than 20-fold increase over previous annual allocations for public diplomacy. Additionally, Israel’s Government Advertisement Agency reports spending USD $120.5 million in 2024 on sponsored Google Ads. A report by Turkish news agency, Andolu Ajansi, states that in June 2025, the Israeli government advertisement bureau spent USD $50 million on X, Google, and other platforms to oppose anti-Israel narratives as well as media aimed at exposing famine and alleged war crimes in Gaza.

Counting the costs in the Gaza Strip

The World Bank describes the economy in Gaza as being “near total collapse”, with the GDP falling 17 percent in the West Bank as of 2024, and 83 percent in Gaza. The UN Conference on Trade and Development (UNCTAD) reported in November 2025 that Gaza’s GDP stood at $362 million in 2024, or $161 per capita. Furthermore, the public debt of the Palestinian Authorities before the war, according to the IMF, was 50 percent of GDP in 2022, which has also increased drastically since the beginning of the war to reach almost 80 percent of GDP by mid-2024.

As the World Bank has stated repeatedly, data collection in Gaza is nearly impossible since almost all economic activity has ground to a halt. Before the conflict, the economy in Gaza was mostly reliant on small industries, agriculture, and service jobs, some that were based in Israeli territories.

Gaza’s crippled economic sectors

The largest contributor to the economy in Gaza before the war was the service sector, contributing to roughly 60 percent of total GDP, which includes healthcare, education, public administration, and transport. The healthcare system in Gaza is operating in a state of near-collapse under the cumulative pressures of sustained military operations, infrastructure damage, and severe supply constraints. According to a May 2025 news release from the World Health Organization, only 19 of Gaza’s 36 hospitals remain partially operational, and of these, 7 are able to offer only basic emergency services.

Gaza’s education system has been largely incapacitated by the conflict, with widespread damage to schools (the UN’s education and cultural organization, UNESCO, reported in February 2024 that 563 school buildings have been bombed) prolonged closures, and the displacement of students and educators. The suspension of formal schooling and limited access to alternative learning modalities have disrupted education at scale.

Moreover, the agricultural infrastructure in Gaza, which contributed to about 6 percent of GDP before the war, was critically impacted. The Food and Agriculture Organization of the UN (FAO) reported in a March 2025 assessment that only 4.6 percent of Gaza’s total cropland is available for cultivation, while more than 80 percent of it has been completely damaged.

With schools, hospitals, and businesses in almost complete ruins, partial to complete blockades have exacerbated the situation. During the aid blockade from the beginning of March 2025 through mid-May, the prices of food and basic necessities skyrocketed, with OCHA reporting that a single bag of flour cost between $300 and $500. The United Nations officially declared a famine in Gaza on Friday, August 22, blaming “systematic obstruction” of aid by Israel during more than 22 months of war. Israeli Prime Minister Benjamin Netanyahu swiftly dismissed the findings and rejected the UN-backed report as “an outright lie.”

The socio-economic aftermath

In the aftermath of the war, Israel witnessed an unprecedented mental health crisis. The Israeli ministry of defense reported that the number of people that received psychological treatment in 2024, due to PTSD, anxiety, and depression, increased by 421 percent compared to 2022. This surge in the need for mental health facilities led to a significant increase in funding to expand psychiatric clinics and mental health services in 2024. “We have allocated $88.4 million USD for psychiatric services in 2024, and 163.4 million USD for 2025,” reported Gilad Bodenheimer, head of the mental health department in the Ministry of Health in an October 2025 statement. A study conducted in July 2024 by Social Finance Israel (SFI), a nonprofit Multidisciplinary Association for Psychedelic Studies revealed that the economic burden of PTSD, post-traumatic stress syndrome, alone is estimated reach 53 billion USD over the next five years.

As for Gaza, between 15 June and 15 August 2024, the World Health Organization conducted a study to evaluate the prevalence of anxiety, stress, and depression among internally displaced people in the Deir al-Balah and South Gaza, mainly those forced to live in tents. The prevalence of depression, stress, and anxiety were 99.5 percent, 93.7 percent, and 99.7 percent respectively, though there is a tremendous paucity of mental health data available across the population.