Israel's war on Gaza continues to put strain on its key economic sectors

Two months into Israel's war on Gaza, many sectors in the country have failed to rebound from the impacts of the conflict, despite the government's efforts to prop up the economy.

Most sectors in Israel's economy experienced a downturn after Oct. 7, when Tel Aviv responded to a cross-border attack by the Palestinian resistance group Hamas with a relentless campaign of strikes and ground attacks on the besieged enclave.

The conflict has seen the Israeli shekel dip to its lowest exchange rate of 4.08 to the US dollar, only to rebound to pre-war levels, standing at 3.84 as of early November.

The rate later improved further to an average of 3.72 per dollar by the end of last month, largely due to an intervention by the Bank of Israel in exchange markets.

Tourism sector

Tourism in Israel witnessed a staggering 76 percent decline in October due to the conflict, which triggered a wave of flight cancellations to and from Tel Aviv.

According to the Israeli Bureau of Statistics, only around 89,700 tourists visited Israel in October, with the majority arriving before the war began.

This represents a year-on-year drop of over 370,000 foreign tourists, underscoring the severe impact that the sector suffered due to Hamas' surprise attack.

November’s tourism data, which is not yet available, is expected to reflect a substantial decline from October.

Aviation

Flights to and from Ben Gurion International Airport, which serves the capital Tel Aviv, have dropped by some 80 percent since the war began, according to a report on the website Secret Flights.

While typically accommodating 500 flights daily, the airport saw only around 100 per day during the conflict until Nov. 10.

Efforts have been ongoing since Nov. 29 to persuade international airlines to resume flights to and from Tel Aviv, with Udi Bar-Oz, head of the National Airlines Company, leading talks with representatives of over 120 foreign carriers, according to the Israeli Broadcasting Corporation.

Since Oct. 7, six foreign companies, including Etihad Airways, Flydubai, Hainan Airlines, and Azimuth Airlines, along with El Al Israel Airlines, continued their operations to and from Israel.

Labour market

So far, the Israeli market has suffered a loss of about 950,000 jobs. Hundreds of thousands of others, meanwhile, face challenges getting to workplaces located near Gaza or in northern Israel near the border with Lebanon, where sporadic fighting has also taken place.

The conflict has resulted in over 178,000 Palestinian workers being unable to commute to their Israeli workplaces or settlements. Also, about 350,000 Israeli employees have joined the army, while approximately 46,000 were laid off, according to data from the Israeli Labour Ministry.

Overall, an estimated 760,000, roughly 18 percent of the workforce, were unable to work due to serving as reserve soldiers, residing near conflict areas, or staying home with children.

Real estate

Within Israel, over 90,000 Palestinian workers are employed in the real estate sector out of a total of 178,000. None have returned to work since the conflict began.

Meanwhile, Palestinian labour has partially returned in other sectors like agriculture and food industries, amid scarcity of this type of goods in Israeli markets.

The real estate industry showed a decline of over 8 percent on the Israeli Stock Exchange by the end of last month compared to pre-war levels.

Israel resumed its brutal military offensive on the Palestinian territory on Dec. 1 after the end of a weeklong humanitarian pause with the Palestinian group Hamas.

At least 16,248 Palestinians have been killed and more than 43,616 others injured in relentless Israeli air and ground attacks on the enclave since Oct. 7 following a cross-border attack by Hamas.

The Israeli death toll in the Hamas attack stood at 1,200, according to official figures.