Escalating Israel-Iran conflict threatens to derail both economies

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Since Israel and Iran strike against each other for the seventh day, the region is being disturbed by a potentially widespread conflict. A report from a foreign outlet ‘Al -Jazeera’ states that there are question marks on the capabilities of both sides to financing the war -torn efforts.

On Friday, Israel killed several Iranian top military commanders and nuclear scientists and damaged some of its nuclear sites. Since then, parts of Iran’s fierce fuel sector have been damaged. In response, Iran has launched missile attacks in government buildings and metropolitan areas in Israel. As of Thursday, Israeli attacks have killed 240 people, while at least 24 people have been killed in Iranian attacks.

“Can Israeli and Iranian economies avoid war?” In a report titled? Published on Thursday, Al -Jazeera added that the dispute also costs billions of dollars to the two countries and can stop their economic growth and affect long -term financial concerns.

What are the costs of war for Israel?

Israel’s long -term military operations in Gaza and the recent rise with Iran have sank the country in the most expensive period of conflict in its history. According to a January report by the Israeli business newspaper, only 2020 billion shekels ($ 67.5 billion) have reached 250 billion shekels ($ 67.5 billion) in the total cost of eliminating the total cost of elimination of $ 67.5 billion.

According to Israeli News Outlet News June 15 reports, the Israeli Army Chief of Staff’s former financial adviser said that Israel only cost 5.5 billion shekels (about $ 1.45 billion) in the first two days of fighting with Iran. At this rate, the long conflict with Iran could overtake Israel within seven weeks of the Gaza war. Even before the current increase with Iran, Israel dramatically increased its defense budget during its several regional conflicts and the war against Gaza. In 2023, 60 billion shekels ($ 17 billion), in 2024, increased to 99 billion ($ 28 billion). The 2025 estimates show that it can reach 118 billion shekels ($ 34 billion).

The Ministry of Finance set the roof of a 4.9 % deficit of Israel’s total domestic product (GDP) for this financial year, equivalent to 105 billion shekels ($ 27.6 billion). High military expenses will put it in the exam.

How will the latest conflict impact on Israeli loan profile?

Despite the recent rise in the expected tax revenue – from 517 billion to 539 billion shekels ($ 148 billion to $ 154 billion) – Israel’s 2025 forecast has been reduced from 4.3 to 3.6 percent.

According to the Business Survey Company Coffee BDI, about 60 60,000 Israeli companies were closed in 2024 due to shortage of workforce, obstacles in logistics and business sentiment. In addition, before the arrival of tourists, the level of October 2023 decreases less than October 2023.

In the event of a full war with Iran, these trends can be enhanced.

S&P Global Ratings on Tuesday issued a strong warning about the weakness of the Israeli economy. The agency said that a continuous campaign for the Israeli war, especially if a permanent and strategic Iranian reaction, could reduce Israel’s credit rating from A to A-. If this happens, this will increase the cost of borrowing and investors’ confidence in the Israeli economy will be softened.

How has Iran’s focus on fuel industry impacted?

In recent times, Iran’s oil exports have fallen dramatically. On Sunday, the total Iranian crude oil and condensate oil exports predicted to reach 102,000 barrels per day (BPD). According to the analytical firm’s plow data, this year, exports are less than half of the average of 242,000 BPDs.

Critically, exports from the island, where Iran exports more than 90 % of its oil, has been completely stopped since Friday. According to the LSEG satellite ship tracking data, no tankers were anchored in Kharg Island on Monday.

According to the United States Energy Information Administration (EIA), in 2025, Iran has developed an average of 3.4 million BPD crude, in which China’s primary foreign buyer appears. Most of Iran -made oil is for domestic use.

On Saturday, Iran partially suspended gas production in South Pars Gasfield in the Gulf after Israeli missiles were hit. South Pars, which Iran shares with Qatar, is the world’s largest gas field. It produces about 80 % of Iran’s total gas production.

For now, the damage to the South Parsfield is not known. In addition, Israel has targeted the fuel depot along the city of Tehran, along the capital, as well as the fuel depot. The complete effect of these strikes on production is not known.

How do sanctions against Iran play their role?

Iran has faced economic sanctions from the United States in 1979 after the Islamic Revolution and the hostage crisis and then its nuclear program.

In an attempt to pressure Tehran to agree to an agreement on its nuclear program, the then US President Barack Obama’s administration prepared many major economies around the world to reduce or prevent oil purchases from Iran, using a wave of further sanctions.

In 2015 with the United States, Russia, China, France, Germany, the United Kingdom and the European Union, Iran eased these sanctions after the Joint Comprehensive Plan of Action (JCPOA) agreement.

Next year, Iran exported 2.8 million BPDs of petroleum products.

But US President Donald Trump, during his first term, resolved the sanctions and further increased it in 2018, yet most other countries pressured to stop buying Iranian crude. According to the EIA, the result was that Tehran generated only $ 50 billion in oil export revenue in 2022 and 2023, which is about 200,000 BPDs of raw exports, which is less than 10 % of the level of 2016.

The thing is that sanctions have eliminated Iran’s foreign exchange income. Iran has partially stopped economic elimination thanks to China, which is the central buyer of oil and is one of the few countries that are still trading with Tehran.

Nevertheless, the loss of revenue due to sanctions has deprived the country of long -term economic growth and has affected Tehran’s ability to fix the dilapidated infrastructure.

President Masood Pazeshkian has repeatedly highlighted the economic situation facing the country, he said, adding that the situation in Tehran is more difficult than in the Iraq war in the 1980s.

In March, he openly criticized the latest period of US sanctions targeting Iranian oil -carrying tankers.

What are Iran’s other challenges?

Iran also faces other obstacles – energy and water shortage, falling currency and its regional allies – all of them have increased through sanctions.

Lack of investment, reduction in natural gas production and irrigation irrigation all leads to power shortages and water shortages.

Meanwhile, according to foreign exchange websites, Iran’s currency, Iran’s currency, has eliminated more than 90 percent against the dollar since re -enacting sanctions in 2018. And while the official inflation rate is about 40 %, some Iranian experts say it is actually running more than 50 %. “It is difficult to come in the exact number.” “But what we can say is that years of sanctions have given rise to inflation pressure, including a reduction in the value of the rial. As a result, imports of goods from abroad are more expensive.”

In January, the Tasnim News Agency quoted the head of Ibrahim Sidigar, head of the Iranian Institute of Labor and Social Welfare, as saying that 22 to 27 percent of Iranians are now below the poverty line.

Unemployment is running at 9.2 %. However, the representatives of the workers, the Iranian High Assembly, which represents labor interests, estimated that the real personality of the people had access to work without any level.

What can Iran spend?

According to Al Good, Tehran has a “relatively small budget for military purposes”. Al -Jazeera reports that he estimated that Iran’s GDP spends up to 3 to 5 percent of defense anywhere, which is about $ 12 billion.

Tehran has a B 33bn in foreign exchange reserves that can ideologically attract. But El Gaud said: “This is the place where Iran is on the back foot. The use of short -term military conflict reserves will be disabled for a long time.”

“We have seen a rally ‘under the flag,” he said.