ISRAELI REPORT WARNS OF ISOLATION, FINANCIAL DEFICIT IF TRUMP’S GAZA PLAN FAILS

Mon 06 October 2025:

An Israeli economic study has warned of severe repercussions for the country’s economy if the US President Donald Trump’s ceasefire plan is not implemented and the war in Gaza continues.

The report, published by the Aharon Institute for Economic Policy at Reichman University and cited by the business daily Calcalist, outlined three possible scenarios. It warned that a full occupation of Gaza would result in “international isolation, a massive financial deficit, and a sharp decline in living standards.” Continuing “hostilities” without a settlement, it added, would also exact a heavy economic toll.

According to the study, only the implementation of Trump’s 21-point plan could put Israel “back on the right path” by halting the fighting and stabilising the economy.

The report noted that two years after what it described as Israel’s “worst security failure since the state’s founding,” the conflict has deeply entangled the economy. While Trump’s initiative showed signs of progress over the weekend, it has yet to bring about a definitive end to hostilities.

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Bank of Israel sounds alarm on economic effect of growing isolation

The Bank of Israel has kept short-term interest rates unchanged, citing Israel’s push deeper into Gaza along with persistent inflation, while warning of the effect of the country’s growing global isolation.

In a news conference after the decision, Bank of Israel Governor Amir Yaron cautioned that Israel’s deteriorating reputation over Gaza could damage trade, foreign investment and the economy as a whole.

“Israel depends to a considerable extent on its participation in the global economy,” Yaron said. “Therefore, Israel must do all that it can to strengthen its international standing, and thus ensure that the economy is open.”

Yaron warned that the continuation of the conflict would lead to further supply constraints and weigh on recovery.

“As a direct result, growth would be lower, the budget deficit would expand, and the paths of inflation and the interest rate would be higher,” he said.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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