The Hamas-Israel conflict has been a persistent part of Middle Eastern history, characterized by periods of intense hostility followed by ceasefires and temporary calm. The economic impact of this perennial conflict on the Middle East is a topic of critical importance, affecting not only the economies of Israel and Palestine but also the broader Middle East region. The first aspect to consider is the direct economic costs borne by the primary parties involved: Israel and Palestine’s Gaza Strip, where Hamas is based. In Israel, the conflict has necessitated a significant allocation of resources towards defense and security measures. The Iron Dome, Israel’s missile defense system, has been instrumental in mitigating the damage caused by rocket attacks from Gaza. However, each missile intercepted comes at a steep price tag. In addition, there are substantial costs associated with repairing infrastructure and properties damaged during the conflict, emergency response services, and compensation to the families of victims. For Palestine, particularly the Gaza Strip, the economic impact is even more profound. The Israeli-Egyptian blockade, in place since Hamas took control of Gaza in 2007, has severely restricted the movement of goods and people, leading to a crippling economic situation. The recurrent conflicts have caused widespread destruction of infrastructure, homes, and businesses, leaving the Gaza Strip with a staggering unemployment rate and an economy on the verge of collapse. The UN has called it a “de-development” scenario where, despite receiving aid, Gaza is sliding backwards economically.

The economic impact of the Hamas-Israel conflict extends beyond the borders of these two entities. Neighboring economies such as Egypt and Jordan are directly affected by the instability. Egypt, sharing a border with Gaza, often becomes a mediator in the conflict but also bears the burden of increased security costs and the sporadic influx of refugees. Moreover, the Suez Canal, a significant global trade route managed by Egypt, can be affected by regional instability, potentially disrupting global trade. Similarly, Jordan, with its large population of Palestinian refugees, faces the strain of providing for these additional residents amidst its own economic challenges. The conflict has also impeded Jordan’s trade with the West Bank and deterred tourism, a key revenue source. Beyond the immediate neighbors, the Gulf States, though geographically distant, are economically affected due to their political and religious ties to the region. The conflict has often led to increased oil prices due to perceived instability in the Middle East, impacting global economic conditions. Furthermore, these states have often provided financial aid to Palestine, representing an additional cost of the conflict. The Hamas-Israel conflict also indirectly impacts the Middle Eastern economy through its effect on foreign direct investment (FDI). Continued conflict creates an environment of uncertainty and political risk, discouraging both regional and international investors. This lack of investment hampers economic growth, innovation, and job creation. Moreover, the conflict distracts from and exacerbates the existing economic challenges in the Middle East, including unemployment, underdevelopment, and the need for economic diversification away from oil. The human capital loss due to the conflict is significant, with a generation growing up amid violence, displacement, and limited educational opportunities. The Hamas-Israel conflict represents a significant impediment to the economic progress of the Middle East. Its impact is vast, affecting direct participants and neighboring countries, influencing global oil prices, deterring foreign investment, and diverting resources from essential development needs. For the economic potential of the region to be fully realized,

By Cora Sulleyman