Macro-financial risk
2026-04-26
10 minute read
10 sources
Israel 2026: The Fiscal-Political Reset After Gaza, Lebanon, and the Iran Strikes
The Bank of Israel pegs cumulative direct war costs near 250 billion shekels, the deficit ran at 6.9 percent of GDP in 2024, and three rating agencies have downgraded Israeli sovereign credit. The 2026 question is whether the macro stabilization holds while reconstruction, settlement spending, and the legal cases at The Hague run in parallel.
Israel ended its multi-front war cycle with a January 2025 Gaza ceasefire and a November 2024 Lebanon ceasefire, after roughly fifteen months of combat that mobilized 360,000 reservists at peak, drove GDP down 19.4 percent annualized in the fourth quarter of 2023, and forced the central government deficit to 6.9 percent of GDP in 2024. Th...