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Israel Post-War Economy to Grow Further in 2026 After 3.1% Gain in 2025
Israeli national flags flutter near office towers at a business park also housing high tech companies, at Ofer Park in Petah Tikva, Israel, Aug. 27, 2020. Photo: REUTERS/Ronen Zvulun
Israel‘s economy grew 3.1% in 2025, official data showed on Monday, rebounding from a 1% pace in 2024, with growth expected to accelerate sharply as long as a fragile Gaza ceasefire holds.
Growth last year was led by a 7.1% rise in investment and a 5.9% gain in exports, along with a modest uptick in consumer spending. Heavy state expenditure during the two-year Gaza war, particularly on defense, gave an added boost to the economy, economists noted.
“The economy is recovering,” said Yonie Fanning, chief strategist at Mizrahi Tefahot Bank. “The indications for the first quarter of 2026 are also positive – you see that in the trade balance data, etc. So, I think it … sets the basis for continued recovery.”
Israel‘s economy in 2025 outpaced an OECD average of 1.7% and 2% growth in the United States. It also was above the Bank of Israel‘s estimate of 2.8%. The central bank projects a 5.2% growth spurt this year.
“What you’re seeing now is excess demand coming after the war, which is coupled with an increase of supply also, for example, in real estate. And so, you see that in investment, and you should see that more going forward in 2026,” Fanning said.
Per capita growth was 1.7% in 2025.
In the fourth quarter, gross domestic product grew an annualized 4.0% from the prior quarter, powered by a 33% jump in exports following an October ceasefire between Israel and Palestinian terrorist group Hamas.
“This is relatively robust print, especially the business sector activity, impacted by a strong contribution from net exports,” said Leader Capital Markets Chief Economist Jonathan Katz.
A Reuters poll of economists had forecast an annualized 2.6% rate in the final three months of 2025.
Third-quarter GDP was revised to an annualized rise of 12.7% from a prior estimate of 11.1%.
The GDP data follow data published on Sunday showing Israel‘s annual inflation rate eased to 1.8% in January – its lowest level since June 2021 – from 2.6% in December, increasing pressure on the Bank of Israel to lower short-term interest rates next week for a third straight meeting.
Following the inflation data, “most people [in the market] don’t expect it to stay on hold,” Fanning said.
The shekel was flat at 3.09 per dollar, close to a 30-year peak hit earlier in February. Tel Aviv share indices gained as much as 0.3%.
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Israel Expands Iran Strikes as Tehran Moves to Name New Supreme Leader
People stand near a destroyed vehicle as smoke rises after a reported strike on Shahran fuel tanks, amid the US-Israeli conflict with Iran, in Tehran, Iran, March 8, 2026. Photo: Majid Asgaripour/WANA (West Asia News Agency) via REUTERS
Israeli forces expanded their bombardment of Iran overnight, striking fuel depots near Tehran, while Bahrain said an Iranian attack had damaged one of its desalination plants, signaling a widening assault on vital infrastructure across the region.
As fighting escalated on day nine of the US-Israeli campaign against Iran, Tehran moved closer to naming a new supreme leader after the killing of Ayatollah Ali Khamenei, with every indication suggesting his powerful son Mojtaba could take charge.
Israel’s military threatened to kill any replacement for Khamenei, while US President Donald Trump said the war might only end once Iran’s military and rulers had been wiped out.
BLACK SMOKE HANGS OVER TEHRAN
Thick, choking black smoke hung over Tehran on Sunday, residents said, after strikes on oil storage facilities had lit up the night sky with plumes of orange flame.
Iran’s foreign ministry spokesperson Esmaeil Baghaei said the large-scale attack marked a “dangerous new phase” of the conflict and amounted to a war crime.
“By targeting fuel depots, the aggressors are releasing hazardous materials and toxic substances into the air, poisoning civilians, devastating the environment, and endangering lives on a massive scale,” he wrote on X.
Israeli military spokesman Lieutenant Colonel Nadav Shoshani told reporters the depots were used to fuel Iran’s war effort, including producing or storing propellant for ballistic missiles. “They are a legal military target,” he said.
Shortly after the attack, Israeli Prime Minister Benjamin Netanyahu said his government would press on with the assault and strike Iran’s rulers “without mercy.”
“We have an organized plan with many surprises to destabilize the regime and enable change,” he said in a video statement. “We have many more targets.”
Trump told reporters aboard Air Force One that he was not interested in negotiating an end to the conflict that has sent energy prices skyward, hurt business and snarled global travel.
“At some point, I don’t think there will be anybody left maybe to say, ‘We surrender,’” Trump said.
IRANIAN DRONES STRIKE GULF STATES
The governments of Saudi Arabia, Kuwait, the United Arab Emirates and Bahrain reported Iranian drone attacks in their countries on Saturday and early Sunday, with a huge fire engulfing a government office block in Kuwait.
Kuwait’s interior ministry said two of its officers were killed “while performing duties,” while the UAE said four migrant workers had died in Iranian attacks there so far.
Showing the intensity of the offensive, the UAE said air defense teams had knocked out 16 ballistic missiles and 113 drones fired towards the Gulf state on Sunday. One missile fell in the sea and four drones hit the country’s territories.
Bahrain said on Sunday that an Iranian drone attack had caused “material damage” to a desalination plant, though the country’s electricity and water authority said the strike had not disrupted water supplies.
It was the first time an Arab country has said Iran targeted a desalination facility during the conflict. On Saturday, Iran said a US attack had struck a freshwater desalination plant on its Qeshm Island, disrupting water supplies in 30 villages, calling it “a dangerous move with grave consequences.”
Saudi Arabia has told Tehran that continued Iranian attacks on the kingdom and its energy sector could push Riyadh to respond in kind, people familiar with the matter told Reuters.
Lebanon has also been pulled into the conflict after the Iran-backed militant group Hezbollah launched rockets and drones into Israel last week, with nearly 400 people killed by Israel over the past week, the health ministry said.
Israel killed at least four people when it struck a hotel in central Beirut on Sunday, saying it had targeted Iranian commanders operating in the city — the first such strike on the heart of the Lebanese capital — amid heavy bombardment of the southern suburbs and the country’s south and east.
IRAN GETTING CLOSER TO NAMING A NEW LEADER
The clerical body charged with choosing Iran’s next supreme leader could meet as soon as Sunday to name a successor to Khamenei, who was killed in an attack early in the conflict, Iranian media reported.
A majority consensus over the successor has more or less been reached, said Assembly of Experts member Ayatollah Mohammad Mehdi Mirbaqeri, according to the Mehr news agency.
Another member of the council, Ayatollah Mohsen Heidari Alekasir, said in a video that a candidate had been selected based on Khamenei’s guidance that Iran’s top leader should be “hated by the enemy.”
Two Iranian sources told Reuters last week that the clear favorite was Khamenei’s son, Mojtaba Khamenei, who amassed power under his father as a senior figure in the security forces and the vast business empire they control. Choosing him would signal that hardliners remain firmly in charge.
Trump has justified the biggest US military operation in the Middle East since the 2003 invasion of Iraq by saying Tehran posed an imminent threat to the United States, without providing evidence. He has also said Iran was too close to being able to build a nuclear weapon.
The US and Israel have discussed sending special forces into Iran to secure its stockpile of highly enriched uranium at a later stage of the war, Axios reported, citing four people with knowledge of the discussions.
Asked on Saturday about sending ground troops to secure nuclear sites, Trump said it was something they could do “later on.”
The US-Israeli attacks have killed at least 1,332 Iranian civilians and wounded thousands, according to Iran’s U.N. ambassador, Amir Saeid Iravani.
Iranian attacks have killed 10 people in Israel. At least six US service members have been killed, with Iran saying on Sunday it had struck US bases in Kuwait. Israel said on Sunday that two of its soldiers were killed in southern Lebanon.
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Iran Has Lost Nearly 70% of Its Missile Launch Capabilities
An Iranian missile is launched during a military exercise in an undisclosed location in Iran, Aug. 20, 2025. Photo: Iranian Army/WANA (West Asia News Agency)/Handout via REUTERS
i24 News – Iran has reportedly suffered a significant reduction in its missile launch capabilities since the start of the military campaign.
According to information broadcast Saturday evening by Israeli public broadcaster Kan, a large portion of Iran’s missile launch systems have been destroyed or disabled during ongoing strikes carried out by Israel and the United States.
Estimates suggest that roughly 70% of Iran’s missile launchers have been either destroyed or rendered inoperable since the beginning of the offensive. Prior to the campaign, intelligence assessments indicated that Iran possessed approximately 420 missile launchers. Current estimates now place the number of operational systems at around 100.
Reports indicate that about 150 launchers were completely destroyed in precision strikes, while another 150 were damaged in air attacks, leaving them temporarily unusable. Some of the damaged launch systems are believed to have been moved into underground facilities, preventing their immediate deployment.
Despite these losses, military operations are continuing with the objective of further weakening Iran’s ballistic missile capabilities.
The broader military campaign has entered its eighth day. The strikes are targeting not only missile launch platforms but also wider military infrastructure and institutions linked to the Iranian regime.
According to the report, the campaign is being coordinated between Israel and the United States, with each focusing on different operational zones across Iran.
Israel is primarily targeting missile launch sites in western Iran, which are viewed as posing a direct threat to Israeli territory.
US forces are concentrating their strikes in southern Iran, where missile launches have previously targeted Gulf states and American military bases in the region.
The ongoing air campaign is part of a broader strategy aimed at permanently degrading Iran’s offensive missile capabilities and limiting its capacity to carry out long-range strikes across the Middle East.
Military operations remain active, and regional tensions continue to run high as the conflict enters its second week.
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Two Israeli Soldiers Killed in Southern Lebanon, Israel Military Says
The late Master Sergeant Maher Khatar, 38. Photo: IDF Spokesperson
i24 News – The Israel Defense Forces announced that Master Sergeant Maher Khatar, 38, from Majdal Shams, was killed during combat operations in southern Lebanon. Khatar served in the Combat Engineering Corps in the 91st Division.
The IDF said another soldier was also killed in the incident, though the name has not yet been cleared for publication. In addition, one combat officer was lightly injured and was evacuated to a hospital for medical treatment. The officer’s family has been notified, the military said.
According to the military, Khatar fell during an overnight incident in which missiles were fired toward IDF soldiers operating in the area.
The troops were attempting to retrieve a broken vehicle from a position in southern Lebanon when the attack occurred. The specific type of missiles used in the strike has not yet been determined, officials said.
Immediately following the attack, Israeli Air Force fighter jets struck multiple targets in the area, while Israeli forces carried out heavy fire against positions linked to the attack, according to a military official.
The IDF said its forces remain deployed in forward defensive positions along the northern front in order to protect residents of northern Israel. Military officials said regional divisions are conducting ongoing situational assessments and remain prepared for potential escalation.
“The IDF will continue to operate with force and determination to prevent enemy attacks and eliminate any threat posed to the State of Israel and its residents,” a military official said. The army added that it shares the family’s grief and will continue to support them.
