Economic impact of the Israel–Hamas war

The 2023 Israel–Hamas war has significant economic implications, not only for the involved parties but also for the global economy.

Gaza

Gaza's infrastructure and economy

Main article: Economy of Gaza City

The war has caused devastating damage to Gaza's infrastructure and economy. The war has resulted in upheaval and destruction on a scale never before seen in the enclave. The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) reported that over 41,000 homes were destroyed and over 222,000 were damaged. The war also badly affected hospitals, schools, water and sanitation systems, and food security.

Employment in Gaza

The war caused significant job losses in Gaza. As the war reached its one-month mark, 61 percent of employment in Gaza, equivalent to 182,000 jobs, was estimated to have been lost.

Israel

The war is costing the Israeli economy $600m a week due to work absences, according to the Bank of Israel. This is equivalent to about 6% of the weekly GDP. On the other hand, Israel's treasury minister said the daily direct cost of the Gaza war to her country is about $246 million.

It has been estimated that if the war went on for eight to twelve months, the cost of the war to the Israeli economy would be more than $50bn, or close to 10% of GDP, according to Calcalist, citing early Ministry of Finance figures. The estimates assume the conflict is limited to Gaza, without further escalation with other parties, and relies on the 350,000 drafted reservists returning to work soon.

The economic toll of this violence may cost Israel an estimated $400 billion in lost economic activity over the next decade – threatens Israel's economic future. For Israel, 90% of the economic shock will come from indirect effects: reduced investment, slowing productivity growth and labor market disruption.

Global economy

The conflict has the potential to plunge the global economy into recession. War could have significant repercussions on Europe’s economic landscape, impacting it through reduced regional commerce, stricter financial regulations, escalated energy costs, and diminished consumer assurance. Goldman Sachs underscored that the most crucial and potentially impactful method that strain could permeate the European economy was via the petroleum and natural gas markets.

Economic disruption in the world

In a recent report, the World Bank issued a concerning warning on October 30 in regard to the Israel-Gaza conflict. according to the mentioned report, this conflict has the potential to cause a significant global economic shock. One of the potential consequences could be a drastic increase in the prices of items such as oil, with projections suggesting that it is able to reach as high as $150 per barrel. This would have severe implications for the global economy, leading to higher food prices and potentially causing millions of people to go hungry. The mentioned report drawed parallels to the 1973 war, during which Arab members of OPEC, led by Saudi Arabia, imposed an oil embargo on the USA in response to their support for Israel.

Impact on countries

China

China relies on the Persian Gulf for 50% of its oil imports, however, it is currently grappling with a downturn in the real estate sector and experiencing its slowest growth in nearly 30 years;

Bahrain

Bahrain's National Assembly suspended diplomatic and economic relations on 2 November, citing a "solid and historical stance that supports the Palestinian cause and the legitimate rights of the Palestinian people."

Egypt

Egypt, a nation grappling with a vulnerable economy, confronts further obstacles as a result of the ongoing conflict near the Gaza Strip. This confrontation possesses the capacity to disrupt the tourism sector and impede the importation of natural gas, thereby placing strain on Egypt's economy. The war in Gaza, unfolding along Egypt's border with the Sinai Peninsula, coincides with Russia's aggression towards Ukraine and the global impact of the coronavirus pandemic, both of which have laid bare the vulnerabilities of Egypt's economy.

Indonesia

The ongoing conflict between Hamas and Israel is predicted to have repercussions on Indonesia's economy, specifically in the industrial domain. Bobby Gafur Umar, the leader of the Manufacturing Industry at the Indonesian Entrepreneurs Association (Apindo), highlighted that any turmoil in the Middle East would impact the business environment in Indonesia, particularly in the energy sector. A direct consequence of this war is the surge in energy prices, consequently resulting in a rise in the expenses associated with raw materials. This is primarily because Indonesia cannot produce all the required raw materials domestically.

India

Indian experts are expressing their apprehension about the ongoing conflict, as they fear it may have adverse effects on the Indian economy. The escalating oil prices are expected to raise import costs, consequently leading to an increase in prices for commodities and food items. This situation poses a significant challenge for the Indian economy.

Lebanon

The olive trade in southern Lebanon, which is the main source of income for many, was halted as farmers stopped their harvests in fear of the active shelling. According to the Minister of Agriculture, 40,000 olive trees were burned down by fires caused by IDF shelling.

The Institute of International Finance predicted that Lebanon's GDP could decline by one percent by the end of the year and by 30 percent in 2024 in the event of further spillover of the war.

Brand boycotts

The brand boycott was a notable aspect of the war's economic implications. Brands such as McDonald's, Coca-Cola and Starbucks faced consumer boycotts over their support of Israel; reflecting anger at Western governments' support for Israel.

Campaigners in Derry, Northern Ireland persuaded O'Neills to remove Puma products due to the sports brand's sponsoring of the Israeli Football Association. Starbucks was targeted in Keighley, West Yorkshire, with protesters smashing the shop's windows, following the corporation's decision to sue the Starbuck Workers United union after the labour organisation posted on social media support for Palestine.

See also

• Effects of the 2023 Israel–Hamas war
• International reactions to the 2023 Israel–Hamas war