Security costs and investor fears push Israel toward economic crisis

Israeli exporters revealed that companies in Europe and the U.S. have refused to renew export contracts. Marketing networks also announced a suspension of imports of Israeli products until further notice.

In this context, the Israeli daily Yedioth Ahronoth reported that a delegation of experts from the international credit rating agency Moody’s traveled to Tel Aviv and expressed deep concerns over the likelihood of an imminent downgrade of Israel’s credit rating. One official said that if such a downgrade does not occur within two weeks, it would be a “miracle.”

An Israeli economic official who met with Moody’s representatives voiced alarm over the sharp increase in security costs during the Gaza war, stressing that this represents a dangerous turning point.

The official warned that Israel may soon lose control over budget management altogether, leading to greater risks of deficits and mounting debt.

Ron Tomer, head of the Manufacturers Association of Israel, said: “Israel’s trade rating has been severely damaged. The Israeli economy may regress by several years.”

He also noted a shocking request from one of Israel’s “friendly” countries, demanding the removal of all images from meetings with Israeli companies in order to avoid political backlash.

One exporter explained: “The situation worsened after the announcement of the occupation of Gaza City and the increasing spread of videos showing the bombing of buildings, mosques, and the killing of civilians. These images cannot be overlooked anymore. We are condemned to complete isolation and feel rejected worldwide.”

According to a survey by the Manufacturers Association of Israel involving 132 cases, half of exporters have lost deals or failed to renew contracts. 71% said these cancellations were politically motivated and linked to the Gaza war.

The survey also showed that the European Union has been the most active in canceling deals: 84% of Israeli industrialists lost contracts in EU countries, while 31% were similarly affected by U.S. clients.

Overall, 76% of exporters reported direct harm to their exports, while 49% faced unprecedented logistical challenges with shipping, customs, and ports.

Economic analyses link this crisis directly to the consequences of the war on Gaza and the statements of Israeli Prime Minister Benjamin Netanyahu, which have fueled investor concerns over rising security expenditures and growing deficits.