A War With No End, No Plan, No Budget
Israel is fighting a war it can’t afford, for an outcome it hasn’t defined, with money it doesn’t have.
Welcome to Israel Tech Insider. I’m Amir Mizroch, a tech communications advisor and former EMEA Tech Editor at The Wall Street Journal. This newsletter is about connecting the dots to give you a sharp, insider’s take on what’s really going on in Israel’s tech economy.
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No Strategy. No Shekels.
Can Israel afford the war it’s already fighting—let alone the Gaza occupation it’s flirting with?
That’s the $100 billion question haunting policymakers, generals, bond traders, and regular people alike. Since October 7, 2023, Israel has torched through over NIS 300 billion (~$87 billion) fighting Hamas, Hezbollah, the Houthis, and—briefly—Iran. That’s more than 10% of the country’s GDP gone in smoke, tunnels, pagers, and tank fuel. The military says it’s necessary. The treasury says: not indefinitely.
Now, cabinet members are openly debating whether to occupy Gaza. The army pegs the cost of long-term control at NIS 10–35 billion a year—up to 2% of GDP on an ongoing basis. And that’s just to hold the place. Add humanitarian logistics, reconstruction, and basic governance, and the bill starts to look less like a defense expense and more like a forced adoption of a bankrupt microstate that drains Israel of its soul and wallet. Continuing this war without a clear and present exit strategy will sink Israel—lox, stocks, and bagels.
Israel isn’t paying for any of this out of pocket. It’s borrowing. A lot. Public debt is heading north of 70% of GDP, interest payments are ballooning, and the deficit has breached 6.9%. Growth for 2024 crawled to around 1%—a war-battered shadow of the 6.5% high-tech sprint from 2022. Bond markets are watching. Moody’s already downgraded Israel’s credit. If war drags into 2026, foreign capital may start looking elsewhere.
This is the bind: the longer the military campaign continues, the more the economy becomes a second (8th?) front. With tax hikes and emergency budgets trying to patch the fiscal hole, the finance ministry is walking a tightrope with burning shoes. The longer the war lasts, the likelier the shoes burn through the rope.
The central bank has already signaled its discomfort. Governor Amir Yaron warned that six more months of fighting in Gaza could knock another 0.5 percentage points off growth and push Israel’s debt-to-GDP ratio past 71%. Not catastrophic—but not trivial either. Israel doesn’t enjoy the dollar’s reserve-currency privilege. It has to pay real rates, and lenders get twitchy when the war has no exit ramp.
That’s the deeper issue. Markets don’t panic at war. They panic at indecision. The brief, tightly-managed 12-day war with Iran in April barely registered. But Gaza? That’s different. Prolonged, uncertain, emotionally charged. Every day the war continues without a clear political plan, Israel’s macro gets murky.
Trajectory matters. Sustained war spending without an endgame doesn’t just strain budgets. It warps priorities. It postpones growth. It quietly breaks things. War is hell, and expensive. An occupation would be even more so. But the real cost is strategic drift: fighting a war Israel can’t afford, for an outcome it hasn’t defined, with money it doesn’t have. That’s the definition of folly.
Spending what 5-10 billion dollars a year on occupying Gaza doesn’t seem like it’s that much. You can afford that probably. The alternative is what?
I like seeing some numbers and not only because I write about decision intelligence products; it gives a great perspective as to why Israel needs to be strategic now more than ever with its next steps.
Not just in Gaza. On all fronts, including the economic one. Seeing it as an Israeli living abroad, it feels like many in the business community are waiting for this situation to be over so that they can go back to investing in Israel and rebuild some business connections that were temporarily put on hold due to the war.