Israel's war with Iran and renewed fighting on the northern front are costing an estimated 1.5 billion shekels per day in military expenses alone, before accounting for civilian and indirect economic damage. The defense budget, initially set at 112 billion shekels in December, has already risen to 144 billion shekels, with new demands reaching 177 billion shekels amid concerns that the conflict could expand or be prolonged. The surge reflects a sharp increase in reservists mobilized and the intensive use of munitions and aircraft.

The government has approved billions of shekels in supplemental funding, including emergency allocations for urgent procurement, while operating under a temporary continuation budget. Military spending in the first fifteen days alone is estimated at 20 billion shekels, and the total cost of the war could reach 50 billion shekels depending on its duration. Civilian measures, including compensation for unpaid leave, aid to damaged local authorities, and business indemnification, are adding further strain.

Beyond direct costs, the war is weighing heavily on the broader economy. The state budget deficit has widened, the debt to gross domestic product ratio is rising, and debt servicing costs are expected to climb sharply in coming years. Economic growth forecasts have been revised downward, while private consumption has fallen significantly in the early days of the conflict.

The mobilization of reservists and partial shutdown of the economy have compounded the damage, costing billions of shekels each week. While some recovery may follow the war's end, uncertainty remains high regarding long term impacts on growth, inflation, and public finances.