In our June essay on the enormous sacrifices made by the Israeli reservists serving in the IDF, Daniel Polisar stresses that the greatest ones (for those who haven’t given lives and limbs) are familial and personal: parents missing out on their children’s formative years; wives, and some husbands, forced to raise families on their own; children living in fear of their fathers’ deaths. But they have also been economic, as reservists have had to shutter businesses, miss out on lucrative deals, and lose out on job opportunities. These are hardships for individuals that also take a toll on the Israeli economy as a whole.

Yet, somehow, the Israeli economy is weathering the storm. Indeed, the Tel Aviv Stock Exchange did better than Wall Street last year. Marc Reiss reports:

Credit usage returned to pre-war levels. The shekel, which had weakened and crossed the four-shekel-per-dollar mark in late 2023, regained its value. . . . Israel is expected to see economic growth of 4 percent over the next two years—matching the pace of leading global economies. This is particularly impressive given that developed nations are projected to grow at only at a much slower pace during the same period. Unemployment remains very low, fluctuating between 2.6 percent and 3.7 percent, figures that effectively indicate full employment.

The capital markets also reflect this strength. The yield on Israel’s ten-year government bonds is nearly identical to that of equivalent U.S. bonds.

In trying to explain why, Reiss cites “highly effective economic management by the Bank of Israel” and some benefits brought by aliyah. He concludes, however, that the most important factor is the Israeli people.

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.