Israel’s economy shrank amid war with Iran

Israel’s economy shrank 3.5 percent in the second quarter of the year as the 12-day war with Iran disrupted businesses and investment, the country’s Central Bureau of Statistics said on Sunday.

From April to June, Israel’s business sector contracted 6.2%. Private consumption dropped 4.1%, public spending fell 1%, and investment in fixed assets plunged 12.3%, signaling weakening confidence.

Exports of goods and services, excluding startups and diamonds, declined 3.5%, while imports, excluding defense purchases, rose 3.1%.

The downturn followed the June conflict with Iran, which began after Israel attacked military and nuclear sites on June 13.

Iran responded with missile strikes that forced many Israelis into shelters.

The United States joined on June 22 with airstrikes on Iran’s nuclear facilities at Fordow, Natanz, and Isfahan. A US-brokered ceasefire took effect on June 24, ending the 12-day war.

Bank of Israel Governor Amir Yaron told Bloomberg in late June that the fighting was likely to cost nearly $6 billion or 1% of GDP.

Analyst Andreas Krieg told TRT World that overall losses could reach between $11.5 billion and $17.8 billion, around 2% to 3% of Israel’s economy.

Costly for Tehran

The conflict also took a heavy toll on Iran’s economy.

Krieg estimated Iran’s direct and indirect losses at $24 billion to $35 billion, equal to 6% to 9% of its $380 billion GDP.

The conflict also dealt a heavy blow to Iran’s trade: non-oil exports in June totaled $3.4 billion, according to Iranian customs statistics—a 34% drop from a year earlier.

Iran’s digital economy was also hit.

The communications minister reported a 30% contraction and losses of 150 trillion rials (about $170 million) in one month, attributing the damage to widespread internet restrictions imposed during the fighting.