Israel-Iran Conflict: Economic Vulnerability
- Escalating tensions between Iran and Israel are raising concerns about the economic stability in both nations.
- bijan Khajehpour, managing partner at Eurasian Nexus Partners, noted that any economic analysis is arduous due to a lack of reliable data.
- Amir Batmanghelidj,founder of Bourse & Bazaar Foundation,emphasized the critical need for gas to power cars,industrial plants,and power plants.
Assess the economic vulnerability stemming from the ongoing Iran-Israel conflict.News Directory 3 explores how escalating tensions are impacting both nations. Discover the potential economic disruptions for Iran due to infrastructure damage and the challenges Israel faces.Analyze the role of the high-tech sector in Israeli economic resilience and the significance of political stability in iran. Explore how economists are evaluating economic impacts, including recovery signs and future stability.Discover what’s next for these economies.
Iran-Israel war: Assessing the Economic Impact and Recovery Signs
Updated June 19, 2025
Escalating tensions between Iran and Israel are raising concerns about the economic stability in both nations. While Israel shows signs of recovery after months of conflict, Iran faces potential economic disruptions from infrastructure damage.
Morteza nikoubazl/NurPhoto/AP
bijan Khajehpour, managing partner at Eurasian Nexus Partners, noted that any economic analysis is arduous due to a lack of reliable data. He said that the war economy in Iran is already a reality.
Amir Batmanghelidj,founder of Bourse & Bazaar Foundation,emphasized the critical need for gas to power cars,industrial plants,and power plants. He likened the current economic impact to shutdowns during the COVID-19 pandemic.
“It’s about whether there is gas for cars, and enough natural gas to run the power and industrial plants,” said batmanghelidj. He added, “People leaving big cities, businesses getting shuttered, factories going dormant – that is what really indicates that Iran’s economy is slowing down.”
Batmanghelidj also questioned Iran’s ability to retaliate against Israel if its critical infrastructure is targeted.
Signs of recovery in Israel
In Israel,the economy is showing signs of recovery following 20 months of conflict in Gaza,triggered by the Oct. 7, 2023, attack by Hamas. The first quarter of this year saw a 3.4% annualized growth in GDP, compared to 2.5% in the previous quarter.
However, retaliatory strikes from Iran threaten this progress, perhaps targeting densely populated areas and key infrastructure, such as oil refineries, which could force workers to stay home.
Itai Ater, an economics professor at Tel Aviv University, said a prolonged missile campaign would hinder economic recovery. “If we enter a long campaign of missiles … that will make it harder for our economy to recover and return to routine,” Ater stated.
Ater also raised concerns about the long-term economic impact if the situation extends, affecting tourism, flights, and overall productivity.
Fitch Ratings expressed cautious optimism about Israel’s economy, assuming the conflict remains limited. Despite geopolitical risks, they noted Israel’s strong defensive measures and the limited economic impact of Iranian strikes.
S&P Global Ratings, however, warned that infrastructure damage could have significant social and fiscal consequences, given Israel’s small size and high population density.
Israel’s high-tech sector, which accounts for 20% of GDP and 50% of exports, is expected to provide some resilience during the crisis, as workers can shift online and work remotely.
Yaniv Pagot, executive vice president at the Tel Aviv Stock Exchange, noted that investors in the stock market and Israeli currency appear optimistic about the economy.
As the market’s reopening, key Israeli indices have risen, and the shekel has strengthened against the dollar and euro, as Israel appears to be making progress against Iran.
“For the past 20 to 30 years, the iranian threat has been a glass ceiling for Israel’s economy,” said Pagot. “If Israel succeeds in eliminating the nuclear threat, the economic risk will drop considerably, and that has a huge economic importance.”
Political stability targeted?
In Iran, the recent appointment of Seyed Ali Madanizadeh as the new minister of economy raised hopes for improved economic management. Madanizadeh, educated at Stanford and the University of chicago, now faces the challenge of helping Iran navigate the economic impact of the war.
His role includes addressing the potential fallout if Israel’s strategy broadens to include economic targets aimed at regime change.
Batmanghelidj of Bourse & Bazaar cautioned against the assumption that a worsening economic situation will automatically lead to the overthrow of the Iranian government. He stated that political destabilization is incompatible with desired economic outcomes.
“It’s not as if a breakdown of the political leadership leads to better management of the economy overnight,” Batmanghelidj said. “So if we end up in that situation, people are going to be worse off – even if they succeed in creating a political transition.”