17.05.2026 22:21
The war with Iran triggered a sharp collapse in Israel's economy. According to data released by the Israeli Central Bureau of Statistics, the country's economy contracted by 3.3 percent annually in the first quarter of 2026, completely losing the growth momentum it had achieved over the previous two quarters. It was reported that rising military expenditures created a massive black hole in the budget, while the public halted consumption due to security concerns, and the total cost of the war exceeded 120 billion dollars.
The war deepening with attacks on Iran has hit the Israeli economy. According to data from the Israeli Central Bureau of Statistics, the country's economy recorded a sharp annual contraction of 3.3 percent in the first quarter of 2026. This abruptly ended a two-quarter growth trend.
The Israeli Central Bureau of Statistics published a striking report on the country's economic trajectory. The report stated that the economy, which had shown signs of recovery with a 2.9 percent growth in the last quarter of 2025, has once again been turned upside down due to military operations against Iran in March and April.
MILITARY SPENDING INCREASED, CITIZENS TURNED TO SAVINGS
One of the clearest indicators highlighted in the report was that while the budget allocated to the military increased, public spending decreased. The notable economic data for the first quarter of 2026 are as follows:
Private Consumption Expenditure: Decreased by 4.7 percent on an annual basis.
Military Spending: Increased by 9 percent annually due to the war budget.
Gross Domestic Product (GDP): Declined by 4.5 percent annually compared to the previous quarter.
Commercial Production: Recorded an annual decline of 3.1 percent this quarter, following a 5.4 percent increase in the last quarter of the previous year.
"RECOVERY TREND QUICKLY REVERSED"
Globes, one of Israel's leading economic newspapers, stated in its analysis that this decline aligned with market expectations. The newspaper commented that the economic recovery trend seen in the second half of 2025 rapidly reversed with the opening of a new war front.
COST OF WAR EXCEEDS 120 BILLION DOLLARS
The black hole opened in the budget by the war is growing day by day. Cost data leaked from official institutions have revealed the scale of the crisis:
Central Bank of Israel Estimate: The total cost to the country of all military operations conducted since October 2023 has reached 350 billion shekels (approximately 120 billion dollars).
Ministry of Finance Data: The military and civilian cost of just the latest attacks on Iran alone has been calculated at 35 billion shekels (approximately 12 billion dollars).