Israel's economy contracted sharply at an annualized rate of 3.3% in the first three months of the year, the Central Bureau of Statistics said Sunday, as the war against Iran weighed on output.
The decline was not as severe as a 4% drop forecast in a Reuters poll of economists, but it demonstrated a continued strain on the country's economy after years of fighting across the region.
The economy grew 2.9% in 2025 and was expected to bounce back in 2026 to more than 5% growth after a cease-fire was agreed in October to end the Gaza war.
Despite the cease-fire, the Israeli attacks on the Palestinian territory have continued, and since then, Tel Aviv has also been involved in the ongoing U.S.-Iran conflict.
The growth took a hit after the U.S.-Israeli attacks on Iran began on Feb. 28, resulting in weeks of ballistic missile fire from Iran that closed schools while businesses suffered.
The Bank of Israel currently sees the economy growing 3.8% this year, depending on whether a cease-fire forged last month with Iran holds.
In the first quarter, consumer spending fell 4.7%, exports declined 3.7% and government spending shed 4.8%. Investment in fixed assets rose 12.6%.
On a per capita basis, the economy shrank 4.5%.
