'Israel’s' economy shrinks 3.5% amid war on Iran and Gaza costs
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"Israel’s" economy contracted 3.5% in Q2 2025, with officials citing the war on Iran and the ongoing Gaza conflict, which has already cost over $80 billion.
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People buy fruit from a street market in Haifa on August 16, 2024. (AP)
Israeli Channel 13, citing data from the Central Bureau of Statistics, reported that the "Israeli" economy contracted by 3.5% in the second quarter of 2025, its first decline since the outbreak of the war.
Analysts attribute the downturn directly to the war on Iran, which has severely impacted economic indicators.
War on Iran drives losses
The report highlighted that the war with Iran has weighed heavily on growth. Earlier, Israeli newspaper Maariv revealed that "Israel" lost tens of billions of shekels due to the 12-day war, estimating damage to GDP at around 52 billion shekels (over $14 billion).
Even with partial recovery efforts, at least 26 billion shekels ($7 billion), or 1.3% of GDP, is considered permanent economic damage.
Mounting costs of the Gaza war
In addition to the Iran-related losses, "Israeli" media reported that the economic cost of the war on the Gaza Strip has reached nearly 300 billion shekels (about $81 billion). Some estimates suggest the real figure has already exceeded this amount.
Shaul Amsterdamski, an economic commentator for Kan TV, noted internal debates within the Finance Ministry over the scale of the losses, stressing that much of the cost stems from ongoing military operations.
Maxim Ribnikov, director at Standard & Poor’s Global Ratings, ruled out any upgrade to "Israel’s" credit rating until the Gaza war ends, citing its economic and financial toll.
