Mounting costs, waning allies - Israel is in trouble after a year of war

Over the past year, Israel has been waging a brutal war on Palestinians, in the name of targeting Hamas, Hezbollah and other non-state actors by dropping on Gaza the equivalent of six nuclear bombs.

In recent weeks, Israel has also eliminated much of Hezbollah's military and political leadership. However, what is perhaps most shocking is that neither Hamas nor Hezbollah has been defeated.

The brutal, asymmetric and escalating war on multiple fronts in the Middle East is far from over, making it difficult to predict its outcome. Nevertheless, looking back, Israel's short-term military successes are accompanied by significant strategic defeats.

Let’s start with the erosion of Israel's military doctrine.

Endless war

To its own detriment, Israel's own government has undermined the key principle of its military doctrine—short and effective wars.

A year into the conflict, Israel remains in a broader strategic stalemate, grappling with a multifront war that shows no signs of abating. The military is exhausted, and many reservists are reluctant to respond to calls for yet another round of fighting in this seemingly endless conflict.

Military operations have yielded short-term tactical victories, including killing Hezbollah's military leaders, weakening Hamas in Gaza and gaining control over the Rafah crossing between the enclave and Egypt.

But they have not resulted in long-term strategic successes. In military terms, Israel has failed to restore its deterrence capability. Prime Minister Benjamin Netanyahu's government has not achieved any of its set war objectives, including destroying Hamas; releasing all hostages; returning residents displaced by constant shelling to northern Israel.

Hamas still controls most of Gaza, while Israeli forces continue to return to conduct more military raids in places like Jabalia and Khan Younis, areas previously considered "liberated" from Hamas. More than 100 Israeli hostages remain in captivity.

In Lebanon, Hezbollah, instead of retreating north of the Litani River as Israel expects and demands, is daily targeting Israeli military objectives with drones and missiles. Some 70,000 residents of northern Israel remain displaced. In essence, neither Hamas nor Hezbollah has been forced into submission, and the conflict continues without a clear resolution.

Additionally, Israel's military expenditures in 2024 will be twice as high as the previous year. A significant portion of this increase is due to the "Iron Dome" defence system, artillery, and salaries for reservists.

The concept of a "rocket economy" is gaining increasing attention too, as Israel's interceptor missiles are much more expensive than the projectiles they target.

For Iran, the cost ratio is at least three-to-one in its favour, according to Israeli sources. The financial strain on Israel is even more acute when intercepting the inexpensive drones and rockets launched by Hezbollah, Hamas or the Houthis in Yemen.

Throughout its history of warfare, Israel has never been more dependent on military support from its allies, primarily the United States. This is because much of Israel's offensive and most destructive firing power depends on regular US supplies and backup.

Economic decline

In addition to the erosion of its military doctrine, the past year has seen Israel's economy take a turn for the worse. In the last quarter of 2023, especially in the weeks following the beginning of the war on Gaza, Israel's gross domestic product (GDP) shrank by 20.7 percent (on an annual basis).

This sharp decline was primarily caused by a 27 percent reduction in private consumption, a drop in exports, and a drastic decrease in foreign and domestic investments. In the meantime, building and construction has come to a crashing halt, while the tourism industry has faced a major drop in visitors and revenues. According to the business survey company CofaceBDI, roughly 60,000 Israeli companies will close this year.

Additionally, Israel's credit rating has been downgraded multiple times, with the latest reduction coming from Moody's, which lowered the rating by two levels, from "A2" to "Baa1," with a negative outlook due to the escalation of conflict with Hezbollah.

And war costs for the period 2023-2025 are now estimated at $55.6 billion, according to the Bank of Israel.

Diplomatic isolation

Israel's third strategic challenge is its diplomatic isolation on the global stage. Since October 7 of last year, at least nine countries - Türkiye, Jordan, Bahrain, Colombia, Honduras, Chile, South Africa, Chad, and Belize - have severed or downgraded their diplomatic relations with Israel.

Additionally, nine more countries, including Spain, Norway, Ireland, and Slovenia, have formally recognised the state of Palestine.

Efforts to "normalise" relations with Arab countries in the region—central to Israel's diplomatic strategy in the Middle East over the past few years—have now been sidelined, possibly permanently.

Saudi Arabia's Crown Prince Mohammed bin Salman, for example, said last month that his country would not establish diplomatic ties with Israel without an independent Palestinian state. This shift represents a significant blow to Israeli foreign policy, which has traditionally focused on establishing diplomatic relations with regional states.

Meanwhile, international support for Palestine is on the rise, as evidenced by United Nations General Assembly resolutions since October 7 of last year.

In May, 143 member states voted to enhance Palestine's rights at the UN, while only nine countries—including Micronesia, Palau, Nauru, and Papua New Guinea—voted against it (in favour of Israel). This contrast illustrates Israel's diplomatic standing on the global stage.

Israel's reputation plunges

Israeli Prime Minister Benjamin Netanyahu's escalating war has severely damaged his country's image. This standing is now likely at its lowest point in the 76-year history of the state.

Two significant developments stand out: first, the prosecutor of the International Criminal Court has filed charges against Netanyahu and Defense Minister Yoav Gallant for "war crimes and crimes against humanity."

Second, the UN's top court, the International Court of Justice, has found it plausible that Israel's actions may amount to genocide. This process continues to unfold.

Israel is also facing a significant loss of public support, even in countries that are its strongest allies. A YouGov and The Economist poll conducted from January 21 to 23, 2024, shows that half of US President Joe Biden's voters from the 2020 US elections believe that Israel is "committing genocide against Palestinian civilians."

This survey, which included 1,664 American citizens, highlights a profound shift in public perception regarding Israel's brutal actions.

In search of escape

A final, critical point is that the number of Israelis leaving the country surged by 285 percent following October 7.

Moreover, almost a quarter of Israelis have weighed leaving the country over the past year due to the escalating multi-front war, according to Kantar Insights and public broadcaster Kan.

Ironically, Israel is becoming one of the most dangerous states for its majority population - contrary to the vision that the founders of Israel had when establishing the state.

All of Israel's military, economic, diplomatic, social, and legal challenges may intensify in the escalating and never-ending war led by Netanyahu. This is often how things end when one man's political survival takes precedence over everything else.