Israel’s economic conditions in Q3 2025: after Iran, before the ceasefire

ISRAEL - In Brief 03 Nov 2025 by Sani Ziv

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As data for August and September 2025 begin to accumulate, we now have a clearer statistical picture of Israel’s economic performance in the third quarter. The key question we seek to answer is how the Israeli economy responded to the end of the military operation against Iran and whether the recovery that began in July was sustained beyond the initial rebound. Industrial and business indicators Israel’s industrial production rose by 5.5% in August 2025 (seasonally adjusted), extending a 10.5% increase in July and recovering from an 11.8% drop in June during the partial shutdown amid the military operation against Iran. Compared with May (prior to the war), total industrial output was 2.8% higher, and 17.3% higher year-on-year. The rebound was driven mainly by the high-tech sector, with production in computers, electronic and optical equipment, and electrical devices jumping by around 44%-47% year-on-year and 8.2% since May. This surge likely reflects both the recovery of defense-related industries and accelerated procurement linked to the June operation. In contrast, industrial output excluding high-tech sectors fell by about 7% year-on-year, underscoring the weakness in traditional industries. Employment in manufacturing rose by 1%, while hours worked remained almost unchanged (+0.1%), suggesting that recent productivity gains are concentrated in the high-tech segment rather than in broad-based labor expansion. The data suggest that Israel’s industrial sector increased rapidly in the post-operation period, but that the recovery was highly concentrated in high-tech and defense-related industries. The sharp rise in production and exports during July-August reflects a t...