Now that the conflict has subsided in Gaza and Lebanon to a large extent, the impacts of two years of political and military adventures on economy and society are emerging.
On Sunday, thousands of settlers in Qiryat Shemona on the border with Lebanon took to the streets protesting dire economic situation and the inefficiency of the Netanyahu’s cabinet in addressing their economic woes. Protesters demanded that Netanyahu’s government heed their call and declare Qiryat Shmona a “disaster zone” requiring immediate support and intervention.
They assert that despite a year passing since the end of war with Hezbollah, Tel Aviv has taken no serious action to rebuild damaged areas or address residents’ grievances. This perceived neglect, they argue, has fueled deepening discontent and the spread of protests. While Netanyahu’s government had promised to allow residents to return and repair infrastructure, its protracted delays have prevented most from coming home, even though the ceasefire agreement between Tel Aviv and Hezbollah took effect in November 2024.
Qiryat Shmona, a settlement of over 22,000 people in the northern occupied territories, had previously blossomed into a major tourist hub due to its geographic position. However, the year-long war with Hezbollah inflicted severe damage on this and other border communities, forcing thousands to flee their homes. Now, two years after the clashes, life in the settlement has yet to return to its pre-war state. These ongoing protests come as Netanyahu continues to pursue the path toward a new war with Hezbollah, a move that could once again plunge the northern occupied territories into insecurity and displacement.
Heavy costs of warmongering
According to the Israeli Central Bank report, the direct costs of war by November 2025 exceeded $68 billion, accounting for 12 percent of the Israeli GDP. So, the cabinet has to cut spending in other sectors to address the surging military costs.
The cabinet has allocated $35 billion for the military spending in 2026 budget, up from the $28 billion initial proposed sum in the draft budget. This prioritization of the military, which is driven by Netanyahu’s warmongering policies, is increasingly foisting economic burden on the citizens and costing social and economic sectors like education, public health, and public services.
This pressure is now manifesting in the cost-of-living protests in Qiryat Shmona, where an unprecedented economic downturn has allowed only half of the businesses in the region to resume operations. The newspaper Yedioth Ahronoth reported that companies operating in this settlement are earning just 60 percent of their pre-war revenue, a situation attributed to the failure of over 10,000 settlers to return, despite the cessation of war with Hezbollah.
The latest annual report from Israel’s National Insurance Institute (NII), which measures poverty and administers benefits, paints a stark picture of economic conditions in the occupied territories.
The report reveals that 2.8 million people within the Israeli population, including over one million children, face “food insecurity”, a condition defined by an inability to obtain sufficient or quality nutrition. According to the NII, approximately 26.5 percent of all Israeli households cannot afford healthy food. This figure rises to 33 percent among the Haredi (ultra-Orthodox) community and stands at 30.8 percent within the Arab community.
Foreign capital flight
The Israeli aggression campaigns in the region have inflicted significant damage across the economic and social sectors of the Israeli regime. Official statistics indicate that the wars in Gaza and Lebanon have pushed the budget deficit above 8.1 percent and eroded tax revenues, as a substantial portion of resources is diverted to military expenditures.
According to Middle East Monitor, Israel’s economy eked out a meager growth of around 1 percent in 2024, falling short of earlier forecasts and indicating that investment and exports have been hampered by wartime tensions.
Official reports and historical data corroborate this downward trend. For instance, foreign direct investment in the occupied territories in recent years has seen significant declines compared to its peak periods. Analyses by Trading Economics suggest that recent wars have led international investors to adopt a more cautious stance towards major assets and projects in the occupied territories, a trend reflected in the declining value and number of foreign investment deals. A report from the Israeli regime’s Innovation Authority reveals that over the past two decades, foreign investment has decreased, with a notable number of companies relocating their offices abroad.
Furthermore, foreign investors offloaded approximately 2 billion shekels ($589 million) worth of shares on the Tel Aviv Stock Exchange from June through July 2025. This represents a roughly 20 percent drop in net foreign investment in the market and marks one of the first significant capital outflows of 2025. It signals that many foreign investors are reconsidering their exposure due to escalating regional tensions, security concerns, and economic instability.
On another front, media reports suggest that between 46,000 and 60,000 Israeli companies have either shut down or are on the brink of closure due to the devastating impacts of the Gaza war.
Tourism sector in coma
The Israeli tourism has been among the sectors taking the largest damage in the recent wars. According to World Israel News outlet, the foreign tourists visiting the occupied territories has dropped 68 percent in 2024. This sharp drop has cut the Israeli tourism $6.5 billion, a sum showing massive losses for hotels, restaurants, travel agencies, and related services.
Though in early 2025 the tourism sector has slightly recovered, the number of tourists is still less than pre-war visits and a full recovery remains contingent on security and stability and decrease of travel alerts.
Reverse migration
Though economic challenges have added to the Israeli officials’ concerns, the biggest challenge Tel Aviv is grappling with is the reverse migration, something rattling Netanyahu and his allies in the coalition cabinet. The rise in reverse migration from the occupied territories is a direct consequence of Netanyahu’s bellicose policies and the economic pressure from the heavy costs of recent wars.
Official reports from Israel’s Central Bureau of Statistics, comparing migration data from 2023 and 2024, show that approximately 55,300 people left the occupied territories in 2023. By 2024, this number surged to over 82,000, a 50 percent increase in citizen departures. During the same 2024 period, only about 25,000 individuals immigrated, resulting in a negative migration balance and a clear trend of accelerating outflows.
In a bid to stem this reverse migration, Netanyahu’s government announced a plan in recent weeks. Under this scheme, new immigrants and returning citizens in 2026 and 2027 will be exempt from paying income tax. The stated goal is to attract skilled labor and boost investment in the economy.
Additionally, a program titled “One Million Plan” has been formulated with the objective of attracting one million more Jews over the next decade to increase the settler population to 11 million. This plan involves recruiting professionals in technology, medicine, education, and entrepreneurship, supporting young families, and branding it as a so-called national project.
However, Tel Aviv’s recurrent wars with resistance groups in the region, whose scope widens by the day, have become a deterrent rather than a source of security. This reality has led many settlers to choose flight over remaining in the occupied territories in order to preserve their lives.
In general, the consequences of Israeli wars with resistance groups in West Asia show that this regime is suffering from a fragile economic and social conditions and has no clear outlook for exit from the crises. So, if Netanyahu’s adventures in Gaza, Lebanon, and even against Iran continue, not only Tel Aviv loses the chance of economic and security recovery, but also things get worse for it. Pressing ahead with these aggressive policies instead of settling the crises can sink Israel into a costly cycle that, by imposing pressures on the economic and social resources, trigger waves of protests across the occupied territories like what is happening in Qiryat Shemona
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