Israel-Iran war costs fall unevenly as markets rise

The Israel-Iran war costs are being distributed unevenly, with Israel gaining strategic and economic advantages while others absorb much of the damage, Al Jazeera columnist Abdulla Banndar Al-Etaibi argued in a July 26 analysis. He wrote that five months of fighting since the February 28 outbreak of war have weakened Iran’s regional position while leaving Israel’s markets and defence sector strong.

Al-Etaibi said the conflict has been described as existential for both Tel Aviv and Tehran, yet its burdens have not fallen evenly. He pointed to Iranian attacks on Gulf infrastructure, higher costs for Asian and Arab consumers after the closure of the Strait of Hormuz, and deaths of American troops in Iranian strikes, while Israel’s stock market, currency and defence exports have risen.

Who is paying for the Israel-Iran war costs?

Al-Etaibi’s central claim is that Israel is paying real costs, but a smaller share than its adversaries and neighbours. He said Gulf civilians, the United States and energy consumers have carried many of the immediate military and economic costs, while Israel has benefited from pressure on Iran and its allied armed groups.

According to Al-Etaibi, Iran’s long-standing forward defence system is under severe strain. That system relied on allied and proxy forces, including Hezbollah in Lebanon, the Houthis in Yemen and armed factions in Iraq, to move confrontation away from Iranian territory and create pressure around Israel.

He wrote that Hezbollah entered 2026 weakened by its 2024 war with Israel and the loss of strategic depth in Syria. After Hezbollah intervened on Tehran’s side in March, Al-Etaibi said Israel responded forcefully and the United States pressed Lebanon’s government to act against the group, leading to a ban on its military activity and discussion of disarmament.

In Iraq, pro-Iranian factions also joined the conflict and took losses in US strikes, according to Al-Etaibi. He said Washington blocked Nouri al-Maliki’s return as prime minister and backed Ali al-Zaidi, whose government is now under US pressure to disarm pro-Iran factions by the end of September or face economic penalties.

The Houthis, by contrast, were initially reluctant to enter the war after earlier confrontations with Washington, Al-Etaibi wrote. He said they were later pushed to act against Saudi interests rather than directly attack Israel or the United States, putting them against Saudi forces and Yemeni forces aligned with the internationally recognised government.

Why has Israel’s economy held up?

Al-Etaibi cited the Bank of Israel’s forecast for 4 percent growth in 2026, even after a war-related downgrade, and 5.5 percent growth in 2027. He also noted that the shekel has gained roughly 20 percent against the US dollar over the past year and that the Tel Aviv-35 Index has continued to set records.

He pointed to Google’s $32bn purchase of Israeli cloud cybersecurity company Wiz in March as another sign of investor confidence during the war. In defence, he cited Israel’s Ministry of Defence, which said exports reached $19.2bn in 2025, up nearly 30 percent in a fifth straight record year.

Energy and shipping have also helped Israel, according to Al-Etaibi. He said gas output from the Leviathan and Tamar fields is expected to exceed three billion cubic feet, or 85 million cubic metres, per day this year, with surplus gas sent to Egypt for liquefaction and sale abroad, while Israeli Mediterranean ports remain active.

Al-Etaibi said Israel still faces rising defence spending, lower output than its pre-war path and the social and fiscal strain of prolonged mobilisation. His conclusion was that Israel’s gains currently outweigh those costs compared with Iran’s losses, and that preserving this imbalance is likely to be a priority for Prime Minister Benjamin Netanyahu during his Washington visit this week.

This story draws on original reporting from Al Jazeera.