Impact of Israel-Hamas war on economy not yet known: Janet Yellen

Treasury Secretary Janet Yellen said Monday that it’s too early to speculate about the economic consequences of Israel’s war with Hamas, saying the impact will depend on whether the conflict spreads to the wider Middle East.

Gaza-based Hamas launched a terror attack on Israel on Oct. 7 that killed at least 1,400 Israeli civilians and soldiers and 30 Americans. Israel Defense Forces (IDF) are preparing a ground assault aimed at dismantling Hamas’ ability to operate from the Gaza Strip, while both Iran and its Lebanon-based proxy Hezbollah have threatened to enter the conflict on the side of Hamas, which also receives funding and other support from Iran.

“We’re looking at the potential economic implications of the hostilities, although our main thoughts are with the Israeli people for what they’ve suffered. I think It’s too early to speculate on whether or not there will be significant consequences,” Yellen told Sky News.

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Treasury Secretary Janet Yellen said the economic toll of war in the Middle East will depend on whether it spreads beyond Israel and Gaza. (Chung Sung-Jun/Getty Images / Getty Images)

“I think importantly it depends on whether the hostilities extend beyond Israel and Gaza, and that’s certainly an outcome we would like to avoid,” she added. “I think it’s very early days and we’re monitoring the situation at this point.”

Yellen noted that energy markets have seen a slight uptick in prices following Hamas’ terror attack, although oil and gas prices haven’t experienced a significant surge to date.

“At this point, there has been some increase in oil prices, but it’s relatively modest and oil prices are still well off their highs,” she said.

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A salvo of rockets is fired from Hamas-controlled Gaza as an Israeli missile launched from the Iron Dome defense missile system attempts to intercept the rockets over the city of Netivot in southern Israel on Oct. 8, 2023. (MAHMUD HAMS/AFP via Getty Images / Getty Images)

Last week, the Bank of Israel said that it’s too early to assess the economic damage from the current war with Hamas. 

Still, it noted that Israel’s 2014 war with Hamas terrorists in Gaza, which lasted 50 days, caused about 3.5 billion shekels (about $874 million in current dollars) in economic damage that amounted to about 0.3% of Israel’s gross domestic product. The central bank has been projecting that Israel’s economy will grow by 3% in 2023 and 2024.

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Israeli military combat vehicles and tanks are seen near the Israeli-Gaza border as fighting between Israeli troops and the militants of the Palestinian group Hamas continues on Saturday. (Ilia Yefimovich/picture alliance via Getty Images)

A preliminary estimate by Bank Hapoalim, one of the largest banks in Israel, estimated that the economic toll of the ongoing war with Hamas will be at least 27 billion shekels ($6.8 billion), or 1.5% of GDP. 

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The bank’s analysis accounts for the activation of 300,000 IDF reservists who will be temporarily stepping away from their jobs to serve their country for an indefinite period of time. It’s the largest call-up of IDF reservists since the Yom Kippur War of 1973.

Reuters contributed to this report.