Why Israel’s economy hasn’t collapsed during a multi-front war
Al Jazeera English
101,855 views Aug 4, 2026
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Israel has fought on multiple fronts while attracting billions in investment and maintaining one of the strongest-performing currencies in the world. How did it pull it off? Al Jazeera’s Yasmeen ElTahan explains.
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Transcript
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Going to war normally crashes a
country's economy, but in Israel, things
seem to be booming. This year, Tel Aviv
became one of the most expensive cities
on Earth. And tellingly, the city is now
the most expensive place to buy
McDonald's [music] in the world. Israel
has spent nearly 2 years fighting in
Gaza, exchanging fire with Lebanon, and
carrying out direct attacks on Iran. All
of that is very expensive. So, how has a
country fighting a war on multiple
fronts managed to perform so well
economically? [music]
Wars usually make countries poorer.
[music] They weaken currencies and they
drive investment away. But Israel's
economy seems [music] to be defying this
trend. Just compare it with other
countries at war. Take Iran. Their
economy shrunk by over 6% this year, and
Russia is growing at a snail's pace
compared to before the war with Ukraine.
Even compared with countries that aren't
at war, Israel is still outperforming
many of them. The International Monetary
Fund expects Israel's economy to grow
faster than every G7 country. And then
there is the currency. The Israeli
shekele [music] has gained 30% against
the dollar in a decade and 13% in the
last year alone. So what's driving it?
The answer isn't simply the war. It's
the industries that have continued to
grow [music] throughout it. Tech,
defense, and cyber security. Because
historically, this isn't what wartime
economies are supposed to look [music]
like. Take Ukraine. Within days of
Russia's invasion, the central bank
froze the currency [music] and imposed
capital controls. Later that year, it
devalued its currency by 25%. More than
four years later, it's still under
pressure, down another 6.8% in 12
months. Russia hasn't been immune
either. The ruble has crashed more than
once, and its recovery has depended
heavily on government intervention. So,
why has Israel been different? First,
foreign investment into Israel actually
went up. It hit $ 39 billion in 2025, up
from 14.8 billion the year before. There
were also major tech acquisitions that
will keep money flowing into the country
for years. The biggest were Google
buying a cyber security startup called
Whiz [music] for $32 billion. And a
massive gas export agreement with Egypt
worth $35 billion [music] also went
through. Then there was the United
States. The US absorbed some of Israel's
direct war costs by financing weapons,
replenishing [music] interceptors, and
securing air defenses. In other words,
Israel didn't avoid the economic
pressures [music] of war by accident. It
was supported by foreign investment,
energy exports, and extraordinary
backing [music] from the US. But while
markets were celebrating, the people
being attacked by the Israeli [music]
military are still facing a very
different reality.
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