The latest war between Israel and Hamas, along with the closure of the Strait of Hormuz, has sent economic shockwaves across the Middle East, exacerbating Lebanon's already dire economic situation. Ayman al-Zain watched recently as a bulldozer cleared rubble from his destroyed sports clothing store in Beirut's southern suburbs, one of many buildings hit by Israeli strikes against Hezbollah. Despite a nominal truce that has reduced but not halted fighting, al-Zain doubts he can rebuild soon, not only due to fear of further airstrikes but also because of soaring costs.
"Everything is expensive," he told the Associated Press. "If I want to open a new store and get mannequins, hangers, and accessories, the prices are very different than before."
Economic Shockwaves from Regional Conflict
The U.S.-Israeli war with Iran and the closure of the Strait of Hormuz have compounded Lebanon's existing economic woes. Unregulated markets are vulnerable to price gouging, further straining the population. Economy Minister Amer Bisat described the situation as "a major economic shock, one of honestly an existential nature."
Years of Economic Decline
Since 2019, Lebanon has been in the throes of an economic crisis that decimated the value of its currency and banking system. The collapse of Lebanese banks evaporated depositors' savings and plunged about half of the 6.5 million population into poverty. The World Bank estimates $70 billion in financial sector losses, compounded by $11 billion from the 2024 Israel-Hezbollah war. The Lebanese pound has lost over 90% of its value against the U.S. dollar. The state electricity company provides only a few hours of power daily, forcing reliance on diesel generators, making the economy vulnerable to fuel price hikes.
Mohamad Faour, finance professor at the American University of Beirut, noted that Lebanon was already "grappling with multiple rounds of crises. So this round of war only made an already fragile situation more fragile." With the new conflict, 1.2 million Lebanese have been displaced, many sheltering in schools without work or depleting savings on rent.
Job Losses and Crippling Inflation
Bisat estimated an economic loss of around 7% of GDP due to the war, as companies close, jobs vanish, and tourism halts. Inflation is evident everywhere. In the Sabra produce market south of Beirut, vendor Ahmad al-Farra watched an elderly woman walk away after checking price tags. "We're keeping our prices low so we can sell, and even then we're not selling," he said as an Israeli drone buzzed overhead. Even wealthy consumers are anxious, cutting nonessential spending. Riad Aboulteif, who runs several restaurants and bars in Beirut, reported a 90% drop in revenue as the middle class shrinks. He has downsized staff and restructured menus to offer cheaper items.
Price Gouging Worsens
The bankrupt government struggles to crack down on profiteering and hoarding of fuel and essentials. Many agricultural areas are inaccessible due to airstrikes, but al-Farra believes suppliers have raised prices beyond necessary. Generator bills have doubled, forcing businesses to shorten hours or close some days. "If we didn’t take these measures, we cannot continue," Aboulteif said. Bisat's ministry has conducted over 4,000 inspections since March, filing dozens of court complaints, but the issue persists. The government has limited ability to control fuel and goods importers.
No Relief in Sight
With no end to the war, the economic outlook remains bleak. A tenuous ceasefire between the U.S. and Iran is gridlocked, and the Israel-Hezbollah truce has reduced but not stopped fighting. Lebanese families and business owners face daily challenges, hoping for the best. "Only God knows how we’ve been trying to manage ourselves," al-Farra said.
