Economic Impact of the Israel-Hamas War on Palestinian Territories

By Emma Farge and Cecile Mantovani

GENEVA (Reuters) – Gaza’s economy has shrunk to less than one-sixth of its size at the onset of the Israel-Hamas war almost a year ago, while unemployment in the occupied West Bank has nearly tripled, according to a U.N. report released Thursday. This underscores the challenges faced in reconstruction efforts.

The report from the United Nations Conference on Trade and Development (UNCTAD) described Gaza’s economy as “in ruins” more than 11 months after Israel commenced its military campaign in response to deadly attacks by Hamas militants on southern Israel on October 7.

UNCTAD Deputy Secretary General Pedro Manuel Moreno indicated that the Palestinian Authority (PA), which governs under limited self-rule in the West Bank, is under “immense pressure” that threatens its operational capabilities. He stated, “The Palestinian economy is in freefall.”

The report urges the international community to halt this economic decline, address the humanitarian crisis, and establish a framework for lasting peace and development. A comprehensive recovery plan is required.

Further complicating matters, declining international aid and revenue deductions by Israel—estimated by UNCTAD to exceed $1.4 billion since 2019—are straining the Palestinian economy.

Israel’s Finance Minister Bezalel Smotrich, who directed these funds to be withheld, accuses the PA of complicity in the October 7 attack. The PA denies such claims and argues it does not promote violence. Israel also deducts payments made to families of militants and civilians killed by Israeli forces.

The report noted an “alarming economic decline” in the occupied West Bank, which has witnessed increased violence since the onset of the Gaza war.

Job Losses

Over 300,000 jobs have been lost in the West Bank since the war began, raising the unemployment rate from 12.9% to 32%. UNCTAD attributes this decline to increased unrest resulting in over 650 Palestinian fatalities, alongside new trade restrictions and checkpoints imposed by Israel.

According to Israeli reports, around 40 Israelis have died in attacks by Palestinians outside Gaza since October 7. Israel claims its actions in the West Bank are essential to counter threats from Iranian-backed militant groups and ensure the safety of Israeli civilians.

The conflict began when Hamas launched an attack on Israel on October 7, resulting in 1,200 fatalities and approximately 250 hostages taken, according to Israeli sources. In retaliation, Israel’s offensive in Gaza has reportedly claimed over 41,000 Palestinian lives, as per the enclave’s health ministry.