With some 300,000 citizens displaced from their homes, a large proportion of the workforce called up for military service, tourism slowed, agriculture in border areas brought to a halt, and massive government expenditures on the war effort, the Jewish state is under considerable economic strain. Alex Brummer reports that, nonetheless, it appears able to whether the storm:

After an initial currency collapse at the start of the conflagration, the shekel has bounced back strongly. It is now worth 3 percent more against the dollar than on October 7. Blessed with strong foreign-exchange reserves, the Bank of Israel was able to come to the rescue with a large-scale intervention in the foreign-exchange markets.

In Israel, the collapse in total output or GDP in the final quarter of the year is estimated to have been 19 percent. In spite of this, there is no current forecast of recession in 2023 with the economy still expected to expand in 2024.

There will be severe economic costs for Israeli citizens and taxes may eventually have to rise to pay for the war. . . . But as investment bankers Goldman Sachs note: “Israel’s economic and financial vulnerabilities are much lower today than compared to other major episodes of escalating violence.”

The country is protected by its strong currency reserves, reduced dependence on inflows of foreign currency and robust underlying growth. The rebound in the value of the shekel means that when the conflict eases the Bank of Israel has scope to reduce interest rates. Past prudence in managing Israel’s economy mean that stability is not threatened. A rapid recovery of lost wartime output—once the guns are silenced—is eminently possible.​

Considering the current state of Israel-Arab relations, Ghaith al-Omari writes

First and foremost, no ceasefire will be possible without the release of Israeli hostages and commitments to disarm Hamas and remove it from power. The final say on these matters rests with Hamas commanders on the ground in Gaza, who have been largely impervious to foreign pressure so far. At minimum, however, the United States should insist that Qatari and Egyptian mediators push Hamas’s external leadership to accept these conditions publicly, which could increase pressure on the group’s Gaza leadership.

Washington should also demand a clear, public position from key Arab states regarding disarmament. The Palestinian Authority President Mahmoud Abbas endorsed this position in a June letter to Saudi Arabia and France, giving Arab states Palestinian cover for endorsing it themselves.

Some Arab states have already indicated a willingness to play a significant role, but they will have little incentive to commit resources and personnel to Gaza unless Israel (1) provides guarantees that it will not occupy the Strip indefinitely, and (2) removes its veto on a PA role in Gaza’s future, even if only symbolic at first. Arab officials are also seeking assurances that any role they play in Gaza will be in the context of a wider effort to reach a two-state solution.

On the other hand, Washington must remain mindful that current conditions between Israel and the Palestinians are not remotely conducive to . . . implementing a two-state solution.