The economic and social costs of the war in Gaza
A year after the outbreak of the war in Gaza, which later expanded into Lebanon, the two countries in conflict, the Middle East region, and the global economy have been significantly affected.
In Gaza, the war has caused nearly $18.5 billion in infrastructure damage, according to preliminary assessments by the World Bank, the United Nations, and the European Union.
The onset of the war also led to supply and demand shocks, causing a 21 percent year-on-year decline in Israeli economic activity in the fourth quarter. Lebanon, already deep in an economic crisis before the war, has seen one of its few stable income sources—tourism—collapse. Additionally, as international shipping routes are redirected away from the Suez Canal to avoid risks in the Red Sea, one of Egypt’s primary sources of revenue in foreign currency.
In addition to the war, a convergence of factors—high inflation, mounting debt, population displacement, and natural disasters—has created a complex crisis across the region. This combination threatens to deepen poverty and inequality while intensifying climate-related impacts.
This report reviews and analyzes the economic impact of the Gaza war on the countries at the epicenter, including Israel, the West Bank and Gaza, Egypt, Jordan, and Lebanon, as well as the wider region, including the Maghreb countries and the GCC, and the global economy. It tracks the impact on overall economic growth, key sectors, and other implications such as financial volatility, disinvestment, fiscal burdens, and pressure on the oil market. While the report provides comprehensive coverage of these elements, it is worth noting that the war is expanding to involve additional players, and its impact will likely continue to grow.
Perrihan Al-Riffai was an adviser to the executive director for Arab States and the Maldives at the International Monetary Fund. Al-Riffai holds an M.Phil. in economics from The George Washington University in Washington D.C. and an M.A. in economics from the American University in Cairo.
empowerME at the Atlantic Council’s Rafik Hariri Center for the Middle East is shaping solutions to empower entrepreneurs, women, and youth and building coalitions of public and private partnerships to drive regional economic integration, prosperity, and job creation.
At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.
Image: REUTERS/Ali Alloush