Israel’s Economy Contracts Sharply in the Second Quarter of 2025
Israel’s economy recorded a sharp contraction in the second quarter of 2025, weighed down by the fallout from military hostilities that led to widespread business shutdowns and disrupted economic activity.
The impact proved stronger than markets had anticipated.
Official figures showed that Israel’s economy declined on a seasonally adjusted annual basis, undershooting analysts’ expectations of modest growth.
The data highlight the scale of the shock delivered within a relatively short timeframe.
The downturn coincided with a drop in private consumption amid heightened uncertainty and mobility restrictions, alongside a steep fall in fixed capital formation as investments were postponed.
Together, these factors underscored the strain on both demand and investment, leaving Israel’s economy under significant pressure.
Analysts warn that without a sustained easing of geopolitical tensions, the recovery path could remain challenging, delaying improvements in consumer confidence and capital spending in the coming quarters.
