A potential war with Hamas could exacerbate the already dire humanitarian situation in Israel and have significant economic consequences.

• Over 300,000 Israeli workers are currently out of the economy and engaged in a struggle.
• The length of time reservists are away from their jobs will determine the extent of the economic damage.
• An economics professor at Hebrew University stated that the startup industry will experience a brief setback, followed by a surge in investment and demand once the soldiers return.

The possibility of a long war with significant humanitarian consequences in Israel has raised concerns about its impact on the country's dynamic economy.

Over the weekend, Hamas militants carried out a surprise terrorist attack, prompting Israel's defense forces to call up more than 300,000 reservists for duty, which is an unprecedented number in recent history. Israel's standing army, air force, and navy are comprised of 150,000 members.

The reserve force, comprising a diverse group of Israeli citizens, numbers approximately 450,000 members, many of whom have extensive combat experience. This includes professionals such as teachers, tech workers, startup entrepreneurs, farmers, attorneys, doctors, nurses, tourism and factory workers.

Eyal Winter, a professor of economics at Hebrew University in Jerusalem, stated that the impact of Israel's wars on the economy is substantial.

The economic damage resulting from the deployment of reservists will depend on the duration of their absence from their jobs in a country with a population of over 9 million and a GDP of $521.69 billion.

"When the fighting ends, there's a major increase in tourism due to pent up demand," Winter said, adding that tourism dries up immediately in such cases.

Where does the Israeli economy stand now?

Israel's key employment sectors will remain operational during the war because they are heavily staffed with foreign workers.

Israel's chemical industry is a significant exporter.

The Dead Sea region is rich in minerals, and the Port of Ashdod, located 20 miles north of the Gaza Strip, is a major hub for potash exports. Wall Street was concerned about a potash supply problem resulting from Israel, which led to significant jumps in the prices of fertilizer stocks such as Mosaic and CF. Both stocks saw an increase of almost 7% in the first day of trading after Saturday's attack.

The Israeli stock index has fallen 6% this week, but there have been no new warnings from ratings agencies regarding Israel's debt. Despite this, all analysts were concerned about economic issues before the conflict due to the political instability surrounding proposed reforms to the judicial system in Israel.

Since Hamas took control of Gaza in 2007, Israelis have always believed that the current situation was not sustainable. However, the Winter of Hebrew University believes that despite the current bleak outlook, there will be an improvement for the country and the economy in the future.

"Even though it's likely we'll suffer terrible losses, we are confident that we will ultimately achieve a military victory in Gaza," Winter stated.

What is the impact on Israel’s tech industry?

After previous wars, winter has witnessed increased economic activity in various sectors of the economy.

As Israel's technology industry continues to expand, many soldiers returning from battle will apply the skills they acquired on the battlefield to establish security businesses.

Winter predicted that the startup industry will experience a brief setback, but once the soldiers return, investment and demand will also return.

Many major American technology companies have significant production or research and development offices in Israel, including , , and , among others. Additionally, is investing in a manufacturing facility located 30 minutes away from the Gaza border.

One high-tech manager in Israel stated that work continues unless you have been called in to a reserve unit due to their experience with allowing employees to work from home during and after Covid.