A top Israeli economist said a recession looks imminent, Fitch issued a downgrade warning, and traders have ramped up short bets against the shekel.
Tensions in the Middle East have continued to escalate since the Palestinian militant group Hamas killed 1,400 people in its attack on Israel on October 7.
President Joe Biden visited Tel Aviv on Wednesday, Israeli ground troops have started to take positions near the Gaza border, and military strategists have forecasted a looming, extended conflict. Prime Minister Benjamin Netanyahu cautioned on Thursday that the conflict will be a « long war. »
The near- and long-term impact on Israel’s economy remains in question, especially as more than a quarter-million reservists from Israel’s Defense Forces have left their jobs to prepare for war. The majority of them are under 40 years old, and comprise a key demographic in the country’s technology sector, which accounts for about a fifth of Israel’s gross domestic product.
Economist Joseph Zeira, a former professor at Hebrew University and the author of « The Israeli Economy: A Story of Success and Costs, » said the economic impact of something like this is « immediate.
