Middle East: The Israeli economy has suffered another blow after a series of significant economic collapses in recent days. With the escalation of Lebanese military operations deep within occupied Palestinian territories, and the increasing Yemeni strikes reaching occupied Jaffa, the pressure on Israel's financial stability is mounting.

This decline is attributed to the escalating Lebanese front and the increasing Yemeni operations, which have now reached deep into occupied Palestinian territories, particularly in the occupied capital, Tel Aviv.

According to Tel Aviv Stock Exchange data, the TASE 35 index, which includes the top 35 companies, fell by 0.64%, dropping from its historical peak to 2,108 points. This comes after the credit rating agency, Moody’s, downgraded Israel’s development rating by two levels, citing "geopolitical risks," a reference to the increasing Yemeni, Lebanese, and Iraqi operations targeting vital sectors inside occupied Palestine.

Moody’s also forecast further negative outcomes for Israel, complicating its economic situation and deepening its rating downgrade. This decline could exacerbate the ongoing exodus of investors, as Israel’s investment sector faces a severe contraction of 34%. The technology sector has been particularly hard-hit, with many companies closing their doors. By the end of the year, up to 50% of tech companies may cease operations, dealing a major blow to Israel’s economy, which relies on the technology sector for 25% of its budget revenues.

Israeli Government Trapped in "Debt Spiral"

A recent report by the Israeli financial newspaper, Calcalist, highlighted the deteriorating economic situation and the massive debt burden Netanyahu’s government faces amid increasing military strikes from Palestinian resistance and supportive fronts in Lebanon, Yemen, and Iraq.

The report warned that Israel is caught in an increasingly dangerous financial cycle, with no clear governmental action in sight. It pointed out that the escalating military operations against Israel are causing a continuous decline in its economic infrastructure.

The report also highlighted Moody’s credit downgrade, the rising interest rates on Israel’s debt, and the lack of a coherent government strategy to manage the growing deficit and debt burden. It predicted that Israel’s debt-to-GDP ratio could reach 70%, signaling a significant increase in financial risks.

Calcalist further warned that the worsening debt situation could drive investors away, damaging Israel’s economy in the long run. The report noted that rising interest rates in Israeli banks could lead to even more economic deterioration, especially as the government continues to borrow heavily for ongoing expenses, such as housing costs for settlers fleeing northern Palestine. The costs of sheltering these settlers in hotels and rental homes, as well as providing care and compensation, have further strained the government’s budget, which is expected to face additional pressures from Hezbollah’s operations.

The report concluded by describing Israel’s economic situation as being "trapped in a debt spiral," where the growing deficit increases risk premiums, raises interest rates, and slows down growth and productivity. This accelerates the debt-to-GDP ratio and adds to the government’s debt servicing burden.

The report warned that this negative cycle could result in reduced government spending on growth-supporting projects, further exacerbating the debt issue. This could lead to a prolonged economic slowdown, leaving Israel’s economy in a continuous state of struggle, with challenges that are increasingly difficult to overcome.

In conclusion, the newspaper criticized Netanyahu and his finance minister, Bezalel Smotrich, for not addressing the mounting financial challenges, noting that Israel is losing its grip on the necessary solutions. The escalating Lebanese front and the ongoing Yemeni military operations, both in the maritime theater and within occupied Palestinian territories, including frequent strikes on Tel Aviv, Ashkelon, and Eilat, have further expanded the scope of Israel’s crises.