Unprecedented Financial Crisis Hits Israel Amid Soaring Costs of Confrontation with Iran and Lebanon

The Israeli government is struggling to cope with escalating financial challenges resulting from the exorbitant costs of ongoing military operations against Iran and the reinforcement of forces on the Lebanese front. In a late-night meeting, the government approved the allocation of approximately $900 million to the Ministry of Security under the heading of 'Emergency Security Deal,' in an attempt to cover the urgent needs of the army.

This decision coincided with the approval of harsh and comprehensive cuts in the budgets of civilian ministries, totaling $320 million. These cuts affected vital sectors such as education, which lost $61 million, health by $44 million, in addition to the social welfare sector.

The measures did not stop there; the government also approved an increase in the Ministry of Defense's budget by deducting 3% from the budgets of all other ministries, which injected an additional $8.4 billion into the army's coffers. These steps aim to compensate for the severe shortage of financial resources allocated to ongoing combat operations on multiple fronts.

International economic sources reported that Tel Aviv has allocated an initial financial package of $13 billion to fund the direct confrontation with Iran, and this amount includes the costs of replenishing depleted military stockpiles. The funding also covers the salaries of reserve soldiers after the army called up more than 100,000 additional soldiers since the latest escalation last month.

In a related context, American media reports revealed a severe shortage in Israel's ballistic missile interception systems, warning of the enormous financial cost of interception operations. Sources indicated that the cost of intercepting a single missile barrage from Iran could reach $280 million, which constitutes a rapid depletion of financial and defensive resources.

Economic experts believe that the funding for these wars relies primarily on external borrowing, which has led to a jump in Israel's public debt to exceed 12% of GDP since the end of 2023. The total value of this debt is estimated at approximately $100 billion, which places long-term pressures on future generations and the overall economy.

US aid plays a pivotal role in the continuation of military operations, with Washington covering about a third of the costs of the aggression on the Gaza Strip, up to $20 billion. Global Zionist institutions also contribute to injecting financial liquidity to support the Israeli economy, which helps maintain the stability of the currency and the Tel Aviv stock exchange despite the war conditions.

Analysts warned that the austerity policies being pursued, such as reducing public service budgets in favor of defense, will lead to social pressures and a decline in economic growth rates. Growth for 2026 is expected to decline to levels between 2% and 2.5% if military operations continue for more than an additional six weeks.

Inflation in Israel is currently at levels exceeding the central bank's targets, which complicates the possibility of lowering interest rates to stimulate markets. Israel's bet remains on the continuation of Western support, as observers believe that the absence of American financial cover would make it impossible for Tel Aviv to continue the war for a long period.

If the United States stops its financial and military support, Israel will not be able to continue the war for more than approximately six weeks.