The U.S.–Israel war with Iran: macroeconomic and geopolitical developments - Weekly report, March 10, 2026
Headlines:
- Missile attacks toward Israel have declined since the first days of the war, but Hezbollah activity on the northern front has increased. Yesterday, Hezbollah launched a missile toward central Israel, claiming it targeted a satellite communications facility.
- At this stage, the timeline for the end of the war remains highly uncertain. Israeli officials say the campaign could last several weeks, although it could also end sooner depending on developments.
- Several developments during the war have surprised analysts: No large-scale protests have been reported in Tehran; Iran’s retaliation has been broader and more intense than expected; and the regime has so far maintained internal stability and continuity of leadership.
- Iran has blocked the Strait of Hormuz and targeted oil and gas facilities in Gulf states, pushing global oil prices sharply higher and increasing pressure to contain the conflict.
- Meanwhile, U.S. President Donald Trump stated that the military operation against Iran is “almost over” and indicated that Washington is considering opening negotiations with Tehran. Following the statement, oil prices fell back below $90 per barrel after briefly surging close to $120 amid fears of supply disruptions.
- Israeli financial markets weakened slightly this week, with the TA-35 and TA-125 indices falling by around 1.8%, reflecting rising oil prices and uncertainty surrounding the end of the war.
- Israel’s risk premium has increased moderately, with the 5-year CDS rising to about 122 basis points, up from roughly 100 basis points in December, although still below the 175 basis-point peak in 2024.
- The economic impact on Israel of the war is expected to be temporary. GDP losses are estimated at NIS 2-3 billion per week given partial activity and at up to NIS 9-10 billion under a full shutdown scenario. If the conflict lasts around one month, the economy could lose roughly 1 percentage point of annual GDP.
- The fiscal costs of the war are significant, with direct expenditures estimated at roughly NIS 1 billion per day, driven by air force operations, missile defense systems, and the mobilization of more than 100,000 reservists.
- Tax revenues were strong at the start of 2026, rising 11.6% year-on-year in January-February, which provides some cushion against the fiscal impact of the conflict.
- Pre-war economic indicators showed moderating wage growth and stable business activity, with nominal wage growth slowing in late 2025 and the February business survey still pointing to expansion before the escalation.
- Inflation had fallen to 1.8% before the war, but higher oil prices and labor shortages related to reserve mobilization could push inflation temporarily above 2%, leading the Bank of Israel to keep the policy rate unchanged in the near term.
Economic data to watch:
Several economic indicators are scheduled for release in the coming days. On March 12, the Central Bureau of Statistics will publish the consumer confidence index for February 2026 and retail sales by chain stores for January 2026. On March 13, data will be released on real estate transactions (number of apartments sold) for January 2026 and on Israel’s foreign trade in goods for February 2026.
On March 15, the CBS will publish the Consumer Price Index for February, together with the housing price index, the construction input price index, and the producer price index. On March 16, the summary of the balance of payments for 2025 will be released, alongside initial findings from the 2025 Personal Security Survey. On March 17, data will be published on the number of job vacancies in February 2026.
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