It has been over a month since the start of operation Al-Aqsa Flood and the escalation in fighting and Israeli bombings, that claimed the lives of over 10,000 Palestinians and some Lebanese civilians.
Amidst the ongoing onslaught, many have analyzed the impacts that the fighting has had on the Israeli socio-political landscape. Political opposition to Prime Minister Netanyahu had significantly increased since before October 7, and with the ongoing aggressions and the inability of his government to negotiate the release of the hostages, many are blaming him for mismanaging the situation on both security and political fronts.
In light of these ongoing events, the choice to wage large-scale, genocidal aggressions on Gaza has yielded apparent economic losses.
Historically, wars do not necessarily have a negative impact on economies and vary depending on the context. One example of this is how the Israeli economy had witnessed a boost following the 1967 Nakba – where Palestinians were once again expelled from their homes – and the recession that preceded it, while the 1973 war had disastrous impacts.
Economist Ali Noureddine explains that the war came at a time of political and legal turbulence given the current Israeli cabinet’s extremist and legislative measures.
These measures have offset a lot of the advancements that the Israeli economy made in attracting foreign capital and investments, educational and technological progress and relative economic stability.
The economy cannot be insulated this time
Before October 2023, companies had already started leaving Israel due to political turbulence. After the start of this round of fighting, many have suspended activities in Israel, including global companies such as Zara, Nestlé, Inditex among many others. The confidence in investing in the Israeli economy has naturally dropped, alongside a crash in the stock market according to Noureddine. Relatedly, confidence in debt repayment has also plummeted with Israeli credit rating being put under “negative revision.”
The scale of the war and the degree of depth that Palestinian resistance has reached inside Israeli territories have meant that the Israeli economy cannot be shielded from this round of fighting, unlike previous years.
The call on over 300,000 reserve soldiers, including 15 percent of the tech workforce, has taken away from potential contributors to the economy.
Agricultural yields from areas surrounding Gaza, which supply around 75 percent of Israeli agricultural yields, have negatively dropped, impacting food security levels.
Numbers and Trends
In late October, Israeli Finance Minister Tzachi Hanegbi claimed that the war is costing the Israeli economy around $246 million a day, while the Meitav Investment House previously estimated in late October that the cost of military operations alone would reach $6.25 billion if the round of fighting lasts for 60 days.
Meitav also estimated that the expected cost of health and financial compensations for those impacted and the expected loss to public finance are $4.25 billlion and $6.9 billion respectively.
The Shekel continues to depreciate, reaching its lowest levels since 2012, despite a $45 billion central bank package to defend it. The war will cost as much as $51 billion dollars according to the Calcalist financial newspaper.
While these losses have initiated calls for a ceasefire before further economic damage is made, it’s important to note here that a large portion of Israeli military costs are paid by United States taxpayer money, and that it is still too early to estimate the weight of these costs on a $522 billion-sized economy.
The Israeli Labor Market
The Israeli Contractors Union is negotiating with the Israeli and Indian governments to bring in 100,000 Indian workers, as a result of the cancellations of work permits for Gazans and the closure of West Bank crossings to Palestinian workers.
90,000 Palestinian workers lost their jobs as a result of last month’s developments, which created a crisis for Israeli economic sectors. The construction industry in specific is at a standstill as this sector relies heavily on Palestinian labour.
The Israeli labor market has also lost a number of foreign workers, such as 7,000 Thai workers on whom a frozen agricultural sector depends.
In addition, the migration of youth and residents is facilitated by the fact that most Israeli citizens have dual nationalities.
After the onset of the Russian-Ukrainian war, European Union countries have increasingly relied on Israeli gas. Since the start of October’s round of fighting, Israeli gas stopped being pumped to Egypt, which in turn stopped its shipment to Europe, accompanying a 30 percent rise in gas prices in the international market.
Last year, Israel had supplied 5.81 billion cubic meters of gas to Europe through Egypt, which amounted to seven percent of what European countries stored before the winter season.
The hike in gas prices is bound to increase production costs, which adds additional problems to highly industrial countries that don’t export gas, such as EU countries, China and Japan. Furthermore, the World Bank warned that oil prices might reach more than $150 per barrel (1.85x current prices) if the conflict in the Middle East escalates, a scenario that would increase global inflation rates to record levels.
Boycotters and Normalizers
Boycotting campaigns across the world have played a huge part in targeting companies that are affiliated with and directly or indirectly supporting the Israeli military and government. Activists worldwide have boycotted and blocked the entrances of companies such as Starbucks, Pizza Hut and McDonald’s, among other affiliates, and have boycotted and exposed Israeli websites and mobile apps.
The stocks of companies have also significantly dropped during the month of October as a result of the international calls for boycott.
Recently, activists in the UK and the US rallied, occupied and blocked the activities of Elbit Systems, an aerospace and military equipment company that is considered the largest weapons supplier to Israel.
On the other hand of the equation, however, Chairman of Defense Affairs, Interior & Foreign Affairs at the United Arab Emirates Federal National Council Ali Rashi al-Nuaimi announced that the Abraham Accords are not in danger but, on the contrary, they’re the region’s “future” for security, stability and prosperity.
As such, the normalization agreements of many countries in the region have hitherto barely been affected or unaffected at all by the recent round of fighting, except in the case of Saudi Arabia, who has currently suspended normalization talks.
On an ethical, human rights and even strategic level, such governments have much to learn from their Latin American counterparts such as Chile, Bolivia and Colombia who have decided to recall their ambassadors and cut ties with Israel.
“The Laughingstock of the Diplomatic Community”
On a human rights level, this round of fighting has uncovered the realities of Zionist ideology and strategy, and the Israeli government and its Western allies’ genocidal plans.
Amid perspectives that the world is moving away from its unipolarity and US hegemony to a multipolar world with the rise of China and the BRICS countries overall, the “fall of the West” has went beyond an ethical dimension and theories of the demise of political-economic unipolarity are relevant as never before.