Israel’s GDP shrinks 3.3% annualized in Q1 2026 amid conflict

Israel’s economy contracted in the first quarter of 2026, official data shows, as a military conflict with Iran disrupted business activity and consumer spending. The country’s gross domestic product shrank at an annualized rate of 3.3 percent from January through March, according to figures released Sunday by Israel’s Central Bureau of Statistics.

The contraction followed two consecutive quarters of growth and was attributed by officials and analysts to the economic fallout from the conflict. The downturn began after the United States and Israel launched strikes against Iran on February 28, which triggered weeks of ballistic missile fire from Iran toward Israel. Authorities responded by closing schools, restricting public gatherings, and suspending some commercial activities for nearly a month. The mobilization of more than 100,000 military reservists also affected the workforce.

Despite the decline, the economic damage was less severe than many analysts had forecast and was notably smaller than the impact of a previous confrontation with Iran in June 2025. During that period, GDP contracted by over 10 percent. Officials noted that industrial exports showed signs of recovery in...