Israel's Prolonged Conflicts: A Nation Transformed Amidst "Existential Battle" with Iran

Israel's socio-political and economic landscape has undergone a profound transformation over the past two and a half years, marked by escalating conflicts with its neighbours, the besieged enclave of Gaza, and now an "existential battle" with Iran. As the nation navigates unprecedented challenges, its future hinges on a complex interplay of domestic pressures, international scrutiny, and the potential for external mediation.

Escalating Conflicts and Geopolitical Tensions

The ongoing engagement with regional nemesis Iran is framed by many within Israel as an "existential battle," adding another layer of complexity to an already volatile region. Analysts suggest that the ultimate resolution of this conflict may be determined more by lawmakers in Washington than by planners in Israel, highlighting the significant role of international diplomacy.

Israel's stated war aims, including degrading Iran's military capabilities and fostering public dissent against its government, appear distant after four weeks of continuous bombardment. Despite claims from US officials about significantly weakening Iran's military, Reuters reported on March 27 that only a third of Tehran's missile stock had been destroyed, citing US intelligence sources.

Mounting Financial Strain and International Legal Scrutiny

Even prior to the current conflict with Iran, Israel's prolonged military actions, particularly the war in Gaza, had significantly impacted its financial standing. According to the Bank of Israel, the nation's wars on Gaza, the Houthis, Lebanon, and Iran since October 2023 have collectively cost 352 billion shekels ($112 billion), equating to an average daily expenditure of approximately 300 million shekels ($96 million).

Internationally, Israel faces grave legal challenges. The International Court of Justice has acknowledged credible accusations of genocide against the country. Furthermore, in November 2024, the International Criminal Court issued arrest warrants for Israel's prime minister and former minister of defence on charges of war crimes committed in Gaza. Economically, the country is now bracing for potentially catastrophic financial repercussions from its expanded conflict with Iran, with no definitive end in sight.

Domestic Politics and the Rise of the Far-Right

Israel's far-right National Security Minister Itamar Ben-Gvir speaks during a session on Monday as Israel's parliament passes a law making the death penalty a default sentence for Palestinians convicted in military court.

Israel's political landscape has seen a dramatic shift towards the far-right, a trajectory far removed from the era of the Oslo Accords or the expulsion of ultranationalist figures like Meir Kahane. Key figures such as hardline National Security Minister Itamar Ben-Gvir, leader of the Jewish Power party, and ultra-Orthodox Finance Minister Bezalel Smotrich, who advocates for a biblically entitled annexation of the West Bank, now hold central roles in government with considerable cross-party and public backing.

This political shift was underscored by the recent passage of Ben-Gvir's death penalty law, specifically designed to target Palestinians, which was met with celebrations. Further cementing the government's priorities, a record $271 billion budget was passed this week from a fortified bunker, diverting millions of shekels to ultra-Orthodox and hardline settler groups. Critics argue this move is intended to shore up support for Prime Minister Netanyahu's government amidst ongoing military actions.

The ascendancy of extreme right-wing figures and policies marks a significant departure from Israel's past political norms, reflecting profound internal shifts amidst sustained conflict.

Public Sentiment Amidst Prolonged Conflict

Despite the increased strain on families due to emergency measures like school closures, many Israeli analysts suggest that the public still views the ongoing conflict as an inevitable reality. Political consultant Dahlia Scheindlin noted a "graveness" and "grim public determination" among Jewish Israelis to continue the war for the time being.

Polls conducted by the Israel Democracy Institute in late March indicated that 78 percent of Jewish Israelis supported continuing the war. Significantly, however, a majority also believed that planners in both the US and Israel had underestimated Iran's capabilities. The duration and intensity of the current conflict, involving ballistic missile attacks, differ significantly from previous engagements, leading to uncertainty about how long public support will endure.

Regional Impact and International Condemnation

A fire and badly damaged vehicle are seen after an Iranian missile strike on a residential area in northern Israel on March 13, 2026.

While Israel's public faces frequent air raid warnings, shattering any semblance of normality, Iran has not shown strong signs of public disquiet or challenges to its government despite constant bombardment. Meanwhile, international bodies including the United Nations, European Union, and several Western countries have explicitly condemned the passage of Israel's death penalty law targeting Palestinians, signaling growing global disapproval of certain Israeli policies.

Looming Economic Storms and Uncertain Future

The long-term economic repercussions of Israel's escalating conflicts are becoming increasingly apparent. An analysis by French newspaper Le Monde in late March highlighted significant costs through increased defense spending, lost productivity from reservist mobilization, and reduced consumer activity. While tax reductions have temporarily shielded Israeli consumers from soaring fuel prices due to Iran's closure of the Strait of Hormuz, political economist Shir Hever warns this relief is temporary for a fuel-importing nation.

Hever criticized the current economic approach, stating, "what we're seeing develop is the sort of economy you might see in a totalitarian state, where military expenses are undertaken at the whim of central government with no consideration for hope that might fit with the wider economy." Ultimately, the resolution of the war is widely believed to rest more with an increasingly erratic US president than with Israel's own leadership. Prime Minister Netanyahu, when asked about achieving war aims this week, could only state "halfway."

Key Takeaways

  • Israel's ongoing conflicts over two and a half years have profoundly reshaped its politics, economy, and society.
  • The current "existential battle" with Iran is projected to incur catastrophic financial consequences, building on costs of 352 billion shekels ($112 billion) since October 2023.
  • Israel faces international legal challenges, including credible accusations of genocide at the ICJ and ICC arrest warrants for its prime minister and former defense minister.
  • The nation's politics have shifted sharply to the far-right, with figures like Ben-Gvir and Smotrich playing central roles and influencing legislation like the new death penalty law for Palestinians.
  • Despite public exhaustion, 78% of Jewish Israelis supported continuing the war in late March, though many believe Iran's capabilities were underestimated.
  • The war's end is increasingly seen as being determined by US decisions rather than Israeli planning.