Israel faces multi-billion shekel price tag from Iran war
Israel’s 12-day war with Iran is estimated to have cost tens of billions of shekels, with thousands of people made homeless by missile strikes, according to Israeli sources.
Defence spending in 2025 has already exceeded the state-approved budget, reaching between 20 and 30 billion shekels, following the escalation with Iran and the ongoing war in Gaza, according to TheMarker, the economic section of Haaretz.
The Ministry of Defence projects that expenses will rise by an additional 25 to 30 billion shekels in 2026. As a result, Israel’s budget deficit in the first five months of 2025 was 15.9 billion shekels ($4.56bn), Israel's Ministry of Finance stated.
The deficit had risen to 8.5 percent of GDP by the end of September but has narrowed since then to around 5 percent of GDP.
On 13 June, Israel launched air strikes on Iran, targeting nuclear facilities and killing senior military commanders and scientists. In retaliation, Iran fired hundreds of ballistic missiles at Israel. While most were intercepted by Israel’s defence systems, dozens broke through, striking at least 63 sites, according to figures published by Israeli news outlet Ynet.
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The Israeli health ministry reported that 29 Israelis were killed in the Iranian attacks, and 3,238 were wounded.
The Marker described the missile strikes as causing “apocalyptic” destruction, with damage estimated at a minimum of 5 billion shekels.
After the ceasefire went into effect on Tuesday, Israeli Finance Minister Bezalel Smotrich said: "There is no doubt that this morning leaves a bitter taste, but with all the sorrow, the truth is that we achieved a decisive victory in the campaign against Iran.
"We have removed an immediate existential threat from Israel," added Smotrich, who has been criticised in Israel for the delay in compensation for people evicted from their homes.
Thousands of compensation claims
According to property tax estimates, approximately 15,000 Israelis were forced to evacuate their homes due to damage, with many relocating to hotels across the country. The cost of their hotel accommodation is currently estimated at around 100 million shekels ($29m).
"The question is what will happen from now on: the homes of a large part of the evacuees are slated for demolition, and even if they don't, it will take time before badly damaged homes can be rebuilt so that they are habitable," TheMarker report.
"The state will have to pay rent for an unknown period of time to hundreds or thousands of families, some of them long-term, until the collapsed building is rebuilt - a process that could take years."
So far, more than 41,000 claims have been submitted to the Government Compensation Fund, with many more expected, according to data published by the right-wing newspaper Israel Hayom.
Of these, approximately 33,000 claims were for damage to buildings, while over 8,000 related to damage to vehicles, property, and equipment. The majority of claims - around 26,000 - were submitted by residents of Tel Aviv.
Meanwhile, Israel has also incurred significant indirect costs, as only essential workers were permitted to work during the war.
The government is expected to announce a support program for workers and business owners affected by the conflict, with an estimated cost of 2 to 3 billion shekels.
State expenditures are also projected to rise in the coming years due to ongoing payments of permanent compensation to Israelis impacted by the war, according to TheMarker.
Before 7 October 2023, around 6,000 Israelis were receiving permanent compensation from the state. That number rose sharply to 25,000 following the Hamas-led attack on Israel.
According to TheMarker, this figure is expected to increase further in the aftermath of the war with Iran.
While the exact rate of growth is still unclear, the report estimates the additional cost will be at least tens of millions of shekels annually.
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