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The human toll of the Israel-Hamas war is horrific. At the same time, the economic costs—from property destruction, a disrupted labor market, reduced foreign investment, and other factors—loom large. Such losses threaten the future prosperity of both Israel and Gaza—and undermine the possibility of an independent Palestinian state.
A 2015 RAND analysis warned about just how costly a large-scale conflict could be. Now that the Israel-Hamas war is a reality, senior economist Daniel Egel used that study's findings as a baseline to estimate that the fighting could result in $400 billion in Israeli losses over the next decade. Additionally, Palestinians' aggregate economic activity could be reduced by one-third.
The magnitude of these losses might, paradoxically, make peace in the region feasible for the first time in a generation, Egel says. “The reality of this war is that both groups will need external support to recover. That could underwrite a peace anchored in a shared need for a prosperous economic future.”
But turning this crisis into an opportunity for peace will not be easy. It will require commitment from the international community and “vision, leadership, and courage from the Israeli and Palestinian communities.”
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