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Israel's ongoing multi-front war has cost the country 405 billion shekels ($138 billion) since Oct. 7, 2023, driving up defense spending, public debt and concerns over possible cuts to education, healthcare and public services, according to figures and experts cited by Agence France-Presse (AFP).
The total cost of the interconnected regional conflicts that began with Hamas's attack on Israel stood at 405 billion shekels as of late April, Bank of Israel Governor Amir Yaron said during a recent economic conference in Herzliya, north of Tel Aviv.
"That's a huge figure, more than 17% of GDP," Yaron said.
The military campaign against Iran, which began with a wave of U.S.-Israeli strikes on Feb. 28, added another 35 billion shekels ($12 billion) in state costs before a ceasefire took effect on April 8, according to an initial estimate by the Finance Ministry.
After the adoption of the 2026 budget in late March, the government said the Defense Ministry's budget had more than doubled since October 2023.
To support the war effort, the government borrowed heavily on international markets in 2024 and 2025. Public debt has now reached more than 69% of GDP, compared with 60% before the war, according to the Treasury.
Taxes and social security contributions have also increased.
Israelis are "paying twice" for the war, said Esteban Klor, an economics professor at Hebrew University in Jerusalem.
The first cost comes through lower government social spending and reduced investment in public services after several successive "across-the-board" budget cuts, even as the country is "increasing the debt," Klor told AFP.
"Education will suffer, and the quality of infrastructure will decline, as will the performance of the healthcare system," he said.
The second cost is to economic growth, although it has been less visible because the Israeli economy recovered quickly from the initial shock of the war. GDP returned to its 2022 level by 2024 and has continued to grow at a strong pace.
But the ongoing mobilization of tens of thousands of reservists since October 2023 is also affecting the economy.
"Since... many of our workers are in the army rather than at their jobs, this affects production," Klor said.
According to a survey published June 1 by the Israel Democracy Institute, 31 percent of respondents said their wages or income had declined since Oct. 7, 2023.
The decline has hit self-employed people and the lowest-income workers the hardest.
At the Herzliya conference, Tamar Levy-Boneh, deputy head of budgets at the Finance Ministry, warned against a "trauma economy," in which the shock and failure of Oct. 7 push the military to constantly demand more funding to guarantee Israel's security.
"The security establishment must learn to meet its needs in a way that does not undermine the standard of living and must assume its share of responsibility," Levy-Boneh said.
Prime Minister Benjamin Netanyahu has taken a different position.
In September 2025, he said Israel had no choice but to become a "super-Sparta," referring to the ancient Greek city-state organized around war.
As differences emerge between Netanyahu and U.S. President Donald Trump over Israel's offensive against Hezbollah in Lebanon and how to end the war with Iran, Netanyahu is pushing for greater self-sufficiency.
Under his vision, Israel would gradually reduce its reliance on the large military aid it receives from the United States.
On May 3, Netanyahu said Israel would invest 350 billion shekels over the next decade in its national defense industry to secure "overwhelming aerial superiority."
Klor warned that the defense budget could exceed 10% of GDP and called for a swift return to a "more reasonable" level.
Israel is among the developed countries where inequality is most severe, and the prolonged war has added pressure.
According to the latest available study by the Israeli National Insurance Institute, the share of children living below the poverty line rose from 27.6% to 28% between 2023 and 2024.
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