How Much Do Israel’s Wars Cost?

Hamas’s attack on Israel on October 7, 2023 (known as Operation Al-Aqsa Storm) marked a turning point in Middle East conflicts, triggering a major war in Gaza, border clashes with Hezbollah in Lebanon, missile attacks by the Houthis from Yemen, and escalating tensions with Iran.

According to Rokna, by September 2025, these conflicts have lasted over two years, severely straining Israel’s economy. Official reports from the Bank of Israel and the Ministry of Finance estimate that direct and indirect costs of the wars have exceeded $100 billion, equivalent to approximately 20 percent of the country’s GDP in recent years. This article analyzes military and economic expenses since the onset of the conflicts, examines potential future scenarios, and assesses Israel’s capacity to sustain a wartime footing amid multifaceted threats.

War and Armament Costs from October 7, 2023 to September 2025

Since Hamas’s October 7, 2023 attack, Israel entered a multifront war, including ground and air operations in Gaza, limited clashes with Hezbollah in northern Lebanon, and responses to Houthi missile attacks. Direct military costs, including arms purchases, combat operations, and compensation for damages, escalated rapidly. According to estimates from the Bank of Israel and the Ministry of Finance, by May 2024, Gaza war expenses reached 250 billion shekels (approximately $68 billion), including 100 billion NIS for direct military operations and the remainder for economic compensation, such as lost labor and trade disruption. This figure increased significantly by the end of 2024, particularly with the escalation in Lebanon.

In 2024, Israel’s defense budget rose by 65 percent to $46.5 billion—the largest annual increase since the 1967 Six-Day War. Of this, roughly $31 billion (112 billion NIS) was allocated specifically to Gaza and Lebanon operations, covering air operations, interceptor missiles such as the Iron Dome, and arms procurement from the United States. For example, in 2024, Israel received over $5.7 billion in U.S. military aid, largely used for ammunition and drones. By July 2025, the Israeli government increased its defense budget by $12.5 billion to address threats from Iran and ongoing operations in Gaza, raising the total budget to approximately $47 billion.

By September 2025, the total direct war expenses from 2023 onward are estimated at $55.6 billion, equivalent to 10 percent of Israel’s GDP. Indirect costs—including budget deficits (rising from 1.5 percent of GDP in 2023 to 7.7 percent in 2024), increased public debt (over 70 percent of GDP in 2025), and economic losses (such as a 24 percent drop in West Bank employment and a slowdown in the tech sector)—raise total expenditures to approximately $67 billion by the end of 2025. Advanced weaponry, including ballistic missiles and air defense systems, is a major focus. The United States has also spent at least $22.76 billion on Israeli operations and related regional efforts, much of it as direct aid to Israel.

These expenses have not only strained the budget but also caused 4–5 percent inflation and labor shortages due to the mobilization of 360,000 reserve soldiers. Israel’s technology sector, accounting for 18 percent of GDP, lost 20 percent of foreign investment, while tourism and exports were severely affected.

Future Scenarios: Hezbollah, Houthi Attacks, and Potential War with Iran

Israel’s conflicts have expanded beyond Gaza into a multifront war. Future scenarios as of September 2025 include incomplete Hezbollah disarmament, continued Houthi missile attacks, and the possibility of escalation with Iran, each imposing additional costs.

Incomplete Hezbollah Disarmament: International efforts to disarm Hezbollah continue but progress remains slow. The Lebanese army announced plans to disarm southern Lebanon within three months, approved by the cabinet in September 2025, but without a clear timeline. Hezbollah views this as an “opportunity” while insisting that Israel halt attacks, describing disarmament as a “gift to Israel.” Since a temporary ceasefire in November 2024, Hezbollah has handed over part of its weapons to the Lebanese army, but main stockpiles remain intact. If disarmament remains incomplete (70 percent likelihood), border clashes will continue at $1–2 billion per month for Israel and could escalate into a full-scale war, similar to the 2006 conflict, with costs of $50–100 billion.

Continued Houthi Missile Attacks: Yemeni Houthis have launched over 40 missiles since October 2023, including new cluster warhead missiles in August 2025. Israel responded with airstrikes on Sanaa and Houthi propaganda sites, killing 35 people in September 2025. A January 2025 ceasefire temporarily halted attacks, but the Houthis continue to threaten, particularly in support of Hamas. In a continued conflict scenario (80 percent likelihood), Israel would spend $500 million–$1 billion per month on missile interception, putting the Iron Dome under stress. Retaliatory strikes on Yemen also involve complex logistics and could trigger naval clashes in the Red Sea, impacting Israel’s economy.

Potential War with Iran: Tensions with Iran peaked in 2025, ranging from controlled clashes to full-scale war. In June 2025, Israeli strikes on Iran led to a “12-day war.” In a full-scale war scenario, costs could reach $100–200 billion, potentially increasing Israel’s overall military expenditures by 50 percent.

Israel’s Capacity to Sustain Wartime Conditions

With a GDP of approximately $550 billion in 2025, $200 billion in reserves, and U.S. support, Israel can sustain short-term war, but remains vulnerable in the long term. The defense budget represents 9 percent of GDP, above the global average of 2.2 percent, while the IMF projects 2–3 percent economic growth in 2025. Budget deficits of 4.9 percent of GDP could rise to 7–8 percent under ongoing war. Economic authorities warned in February 2025 that multifront wars could push Israel’s debt to 70 percent of GDP and exacerbate inflation.

Economic Vulnerabilities: Prolonged conflict may trigger recession, with 20,000–30,000 jobs lost in the tech and tourism sectors (10 percent of GDP). Labor shortages (due to mobilization) and brain drain (thousands of tech specialists emigrated in 2024–2025) could paralyze the economy. Tariffs imposed in 2025 could reduce exports by 15 percent. In a war scenario with Iran, Red Sea trade disruption could cut commerce by 20 percent.

Social and Military Vulnerabilities: Domestic protests against Netanyahu are increasing, and continuous mobilization undermines public morale. Missile reserves are limited (60–70 percent interception success) against simultaneous attacks from Hezbollah (150,000 rockets) and Iran. Prolonged war could double emigration and erode investor confidence.

Overall, Israel could sustain wartime conditions for 1–2 more years with external support, but beyond that, the risk of economic collapse, similar to the 1985 crisis, becomes significant.