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As Israel’s economy slows, investors ask ‘how long’ will Hamas war go on

Despite fears, previous periods of violence in Israel, Gaza and the West Bank showed the Israeli economy emerging stronger on the other side.
Israeli soldiers patrol in Kibbutz Beeri in southern Israel on November 5, 2023, nearly a month after the October 7 attack by Palestinian militants that left more that 1400 Isaelis dead. The printing press in Beeri, an Israeli community that suffered one of Hamas's worst atrocities on October 7, has started up again in a small step towards recovery. (Photo by Aris MESSINIS / AFP

In the month since Hamas attacked civilians in southern Israel and the Israeli government invaded the Gaza Strip in response, foreign investors have faced complicated decisions about how to manage their exposure to the Jewish state.

While financial markets have remained relatively stable since the outbreak of war last month — with many traders waiting to see if the situation sparked a wider regional conflict affecting energy prices — foreign investors have had a taste of how unstable the economic environment is likely to be for the duration of the war.

The value of the Israeli shekel lost about 5% against the dollar in the immediate aftermath, although it has since strengthened with support from the Bank of Israel.

Foreign investors are also bracing for higher inflation in Israel, following the central bank’s plans to extend 10 billion shekels ($2.6 billion) of cheap credit to help small businesses survive the war, which has already dented the prospects for industries such as tourism.

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