#ISRAELHAMASWAR. The war passes from the front to the markets

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The official website of Iran’s Supreme Leader Ali Khamenei has published detailed statistics on Muslim connections between the countries and Israel. All with the specific intent of boycotting Israeli products and putting in a bad light those Arab countries that do not openly support the Palestinian cause, Hamas and its affiliated brigades.

The most active countries cooperating with Israel are Turkey (metals, building materials, electricity and energy, total exports – $5.7 billion) and the United Arab Emirates (cybersecurity, agrotechnology, fintech, construction, as well as investments in aerospace, energy, medicine and various sectors; commercial turnover amounted to 2.5 billion dollars).

Furthermore, there is Israel’s cooperation with Egypt, Jordan, Bahrain, Kazakhstan and Azerbaijan. The latter two countries satisfy more than 60% of Israel’s oil needs.

Unlike Iran’s expectations of seeing the Israeli market collapse, the Shekel strengthens after the Bank of Israel left the rate unchanged at 4.75%. In daily interbank transactions, the shekel/dollar rate fell 0.62% to 3.703 shekels/dollar, and the shekel/euro rate fell 0.59% to 4.056 shekels/euro.

One of the strengthening factors, in addition to the ceasefire at the southern border, is the depreciation of the US dollar around the world. The dollar is weakening against some major global currencies, as evidenced by recent data released in the United States, such as the Purchasing Managers’ Index (PMI) and private home purchases, which indicate a slowdown in the US economy.

An updated forecast from Israel’s central bank’s research department as of November 29 estimates the conflict’s “gross impact” on Israel to be $53 billion, with defense spending accounting for more than half of the total. Leader Capital Markets had previously estimated the fiscal price of the war at 180 billion shekels in 2023-24, and the Treasury Department said it costs the economy nearly $270 million every day.

The Bank of Israel’s internal research team also lowered its economic growth forecast and now expects gross domestic product to grow 2% this year and next, down from previous estimates of 2.3% in 2023 and 2.8% in 2024. The Treasury Department maintained the same GDP forecast for this year but expects slightly weaker growth.

The OECD lowered its GDP forecast to 2.3% in 2023 from 2.9% forecast in June, and to 1.5% in 2024 from 3.3% previously. This comes after the Bank of Israel revised down its growth forecasts on Monday and now expects the economy to grow by 2% in 2023 and 2024 respectively.

Assuming that the war will focus largely on the southern front, without further regional escalation, the OECD has estimated that the main economic impact will be limited to the last quarter of 2023 and, to a lesser extent, the first quarter of 2024.

Therefore, the organization predicts a recovery of the Israeli economy in 2025 and growth of 4.5%. 

Antonio Albanese e Graziella Giangiulio

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