Israel’s ability to achieve its strategic objectives in Iran through Operation “Rising Lion” also depends on how it can finance this campaign. Israel’s economy is significantly stronger than Iran’s. Although Iran’s population is nine times larger than Israel’s, in 2024 Israel’s GDP stood at over half a trillion dollars, compared to $400 billion in Iran. The gap is even more striking in terms of GDP per capita: $54,000 in Israel compared to $4,400 in Iran. Despite these disparities, the economic burden of an expensive and complex operation in Iran requires careful planning and consideration regarding its sources of funding.
Despite the resilience of Israel’s economy, the operation began after twenty months of fighting on multiple fronts, which has weakened economic growth and has significantly increased the government budget deficit and debt-to-GDP ratio. These variables have already led to several credit rating downgrades for Israel from October 2023 to the present. Furthermore, due to the renewed heavy fighting in Gaza under Operation “Gideon’s Chariots,” on the eve of the strike in Iran, there was already a 20-billion-shekel overrun in the 2025 budget, approved only three months earlier.
We do not yet know the full cost of the fighting in Iran. In the first two days, the direct security cost (flight hours, munitions, and reservists) amounts to approximately 5.5 billion shekels. Additionally, in these two days, 2,400 compensation claims were submitted to the Tax Authority’s compensation fund. The estimated damage from these claims stands at about one billion shekels. These expenses do not include significant indirect costs arising from the shutdown of large parts of the economy - due to mass reserve call-ups and the fact that many people stay home as schools are closed because of the missile threat. According to various estimates, the total cost of the operation may reach around 40 billion shekels - equivalent to one-third of Israel’s total defense budget.
The natural tendency for covering one-time costs is to increase the deficit. However, this approach is risky after two years of high deficits, especially when the planned deficit for this year (prior to the operation) already stands at 4.9%. Funding the operation through this route could raise the deficit to over 7%. Instead, there are numerous steps that Finance Minister Bezalel Smotrich can take to free up budgetary resources to finance the operation. For example, there is an opportunity to eliminate unnecessary government ministries and reduce the number of ministers, cut coalition funds and allowances that incentivize people to remain outside the labor force. These steps target non-working populations and do not harm the working middle class, which is already burdened by high taxes. In addition, the state should withhold funding from institutions that do not teach core curriculum subjects.
The State of Israel must implement economic adjustments now to maintain responsible fiscal conduct. Only responsible fiscal policy will ensure that the duration of the operation is determined by strategic military and political considerations—not by economic constraints.
Israel’s ability to achieve its strategic objectives in Iran through Operation “Rising Lion” also depends on how it can finance this campaign. Israel’s economy is significantly stronger than Iran’s. Although Iran’s population is nine times larger than Israel’s, in 2024 Israel’s GDP stood at over half a trillion dollars, compared to $400 billion in Iran. The gap is even more striking in terms of GDP per capita: $54,000 in Israel compared to $4,400 in Iran. Despite these disparities, the economic burden of an expensive and complex operation in Iran requires careful planning and consideration regarding its sources of funding.
Despite the resilience of Israel’s economy, the operation began after twenty months of fighting on multiple fronts, which has weakened economic growth and has significantly increased the government budget deficit and debt-to-GDP ratio. These variables have already led to several credit rating downgrades for Israel from October 2023 to the present. Furthermore, due to the renewed heavy fighting in Gaza under Operation “Gideon’s Chariots,” on the eve of the strike in Iran, there was already a 20-billion-shekel overrun in the 2025 budget, approved only three months earlier.
We do not yet know the full cost of the fighting in Iran. In the first two days, the direct security cost (flight hours, munitions, and reservists) amounts to approximately 5.5 billion shekels. Additionally, in these two days, 2,400 compensation claims were submitted to the Tax Authority’s compensation fund. The estimated damage from these claims stands at about one billion shekels. These expenses do not include significant indirect costs arising from the shutdown of large parts of the economy - due to mass reserve call-ups and the fact that many people stay home as schools are closed because of the missile threat. According to various estimates, the total cost of the operation may reach around 40 billion shekels - equivalent to one-third of Israel’s total defense budget.
The natural tendency for covering one-time costs is to increase the deficit. However, this approach is risky after two years of high deficits, especially when the planned deficit for this year (prior to the operation) already stands at 4.9%. Funding the operation through this route could raise the deficit to over 7%. Instead, there are numerous steps that Finance Minister Bezalel Smotrich can take to free up budgetary resources to finance the operation. For example, there is an opportunity to eliminate unnecessary government ministries and reduce the number of ministers, cut coalition funds and allowances that incentivize people to remain outside the labor force. These steps target non-working populations and do not harm the working middle class, which is already burdened by high taxes. In addition, the state should withhold funding from institutions that do not teach core curriculum subjects.
The State of Israel must implement economic adjustments now to maintain responsible fiscal conduct. Only responsible fiscal policy will ensure that the duration of the operation is determined by strategic military and political considerations—not by economic constraints.