Analysts: The repercussions of striking Iran will impose themselves on the reality of the crumbling Palestinian economy

Special to "SadaNews": With the United States and "Israel" launching a military strike against Iranian targets, and Tehran beginning to respond with missile strikes on several targets in the region, the danger of a regional war has become a reality, which will have dire economic implications depending on the duration, developments, and outcomes of the war.

Analysts confirmed to "SadaNews" that this war will leave severe economic impacts on the already crumbling Palestinian economy after more than two and a half years of a genocidal war waged by the Israeli occupation against Gaza, alongside extensive aggression in the West Bank that has led to unprecedented economic contraction.

Economic expert Dr. Thabet Abu Al-Rous stated, "Certainly, the Palestinian territories are affected by any military escalation against Iran, as there are direct and indirect economic channels due to the close connection with the Israeli economy," pointing out that what happens in Israel will directly reflect on the Palestinian situation, especially concerning international supply chains. Abu Al-Rous predicted a decline in purchasing power and a rise in prices if the war prolongs, in addition to a spike in global oil prices, which will directly affect fuel and electricity prices in Palestine.

On another note, Abu Al-Rous expected the developments of the war to impact the fluctuations of the exchange rate of the shekel against the dollar, noting that this would reflect on citizens' purchasing power and on the prices of goods.

He indicated that Israel may resort to halting what remains of Palestinian labor in "Israel" and the settlements, which could lead to further liquidity shortages in the markets.

He stressed that the length of the war and the ability to close the Strait of Hormuz during this war will determine the extent of difficulties in the supply chains, which will impact the markets in Palestine.

For his part, financial and economic expert Muayed Afana estimated that the developments of the war on Iran will impose themselves on the reality of the Palestinian economy, especially since the economy is already fatigued after more than two years of genocide in Gaza and relies mainly on imports from either Israel or countries around the world via Israel.

Afana pointed out that the Palestinian economy depends on its strategic goods (fuels, electricity) on Israel, and therefore any dramatic developments in the war could affect the realities of the Palestinian economy and supply chains, especially since Israel will prioritize the supply for its army and security agencies, and Palestine will not be a priority if the war continues for an extended period.

He added that closing borders and gates will impact intra-trade and supplies. It is true that the inventory of goods in Palestine is available for several months, but any disruption in supply chains could affect the continued flow of those goods, which requires monitoring and follow-up by the relevant authorities.

As for the role required from the government, it is strategic and necessary at this stage to form a governmental crisis cell with the participation of the private sector, the banking sector, and civil society institutions to manage the crisis, especially since the duration and scope of the war are unknown, which requires managing the internal scene through a unified communication channel obligated to convey updates about all developments related to citizens, such as the working hours of official institutions, universities, and schools, in addition to forming sub-emergency committees led by governors to manage the field situation, especially the sale of fuels and gas, ensuring fairness in distribution and preventing monopolies, and monitoring the sale and purchase of essential goods within a governance framework and not relying solely on citizen culture. There is also a need to enhance the role of local authorities through sound decentralization as they are at the forefront of providing services to citizens.

For his part, economic expert Dr. Said Sabri says that the ongoing war cannot be viewed as a separate military event, but rather as a regional shock with wide economic repercussions, pointing out that the Palestinian economy is among the most exposed to these repercussions. The absence of monetary and financial sovereignty, along with nearly total reliance on external sources for energy and trade, makes any regional escalation quickly turn into a direct burden on the Palestinian market.

He notes that the initial impact is reflected in an increased level of uncertainty, which immediately affects the exchange rate of the shekel and inflation expectations. Any decline in currency value or increase in import costs transfers directly to the prices of essential goods, especially food and fuel, at a time when the Palestinian citizen is already suffering from wage erosion and rising unemployment levels.

In parallel, global markets began to price the war through rising energy, transport, and insurance costs. He clarified that Palestine, which imports almost all of its energy requirements through Israel, will absorb these increases without any real mitigation tools, raising production costs and putting pressure on final prices, deepening the living burden on households.

As for the public finances, Sabri believes that regional wars usually lead to a rearrangement of international community priorities, such that developmental support declines in favor of urgent security and humanitarian files. "This exacerbates the already existing financial crisis amid clearance deductions and weak revenues, limiting the government's capacity for social and economic response," he added. He pointed out that these developments cannot be detached from the labor and trade market. Any extensive security escalation increases the likelihood of tightening restrictions on movement and borders, which will reflect on Palestinian labor linked to the Israeli market and on the movement of exports and imports, leading to further contraction and uncertainty within the private sector.

Sabri believes that the war directed towards Iran does not only add a new crisis to the Palestinian economy but also deepens an existing trajectory of economic fragility, pointing out that the real danger does not lie in the military event itself but in the accumulation of shocks on a limited maneuvering economy, fully exposed to regional changes, which makes the Palestinian citizen pay the cost of a war in which he is not a party, yet he bears its full consequences.

The Palestinian economy witnessed a contraction of 28% by the end of 2024. Meanwhile, the Palestinian economy suffered during 2025 from a "deep recession," as stated in a joint report by the Central Bureau of Statistics and the Monetary Authority, indicating that the GDP dropped by an average of 24% from its level in 2023, reflecting the cumulative damage sustained by the economy since the onset of the Israeli war that harmed productive capacity and continued bottlenecks in economic activities.