'$12 billion a month': The cost of Israel's daily strikes and defence against Iran - war at a premium

Israel is spending hundreds of millions of dollars each day in its escalating conflict with Iran, with the cost of interceptors, munitions, air operations, and infrastructure damage mounting rapidly, according to The Wall Street Journal.

The daily military expenditure could run as high as $200 million just for missile interceptions, with broader operational costs and infrastructure damage driving that figure significantly higher.

Experts estimate that rebuilding damage caused by Iranian missile strikes could alone cost Israel at least $400 million. Former Bank of Israel governor Karnit Flug warned that while the economy may absorb the costs of a short conflict, a prolonged war could be far more damaging. “If it is a week, it is one thing,” she said. “If it is two weeks or a month, it is a very different story.”

The financial toll is being driven in large part by the heavy use of Israel’s air defence systems. The David’s Sling system, used to intercept short- and long-range threats, costs around $700,000 per activation when firing its minimum of two interceptors.

The Arrow 3 system, designed to stop long-range ballistic missiles, costs around $4 million per interception, while Arrow 2 costs approximately $3 million, according to military analyst Yehoshua Kalisky.

The conflict has seen more than 400 Iranian missiles fired at Israel in recent days, most of which required interception. The cost of deploying fighter jets—particularly F-35s—adds further pressure. Each hour of flight costs around $10,000 per aircraft. The cost of fuel, munitions like JDAMs and MK84s, and logistics for long-range missions all contribute to Israel’s spiralling war bill.

Zvi Eckstein, head of the Aaron Institute for Economic Policy, noted that “per day, it is much more expensive than the war in Gaza or with Hezbollah,” citing the overwhelming burden of ammunition and interceptor usage. His institute estimates that a one-month war with Iran could cost Israel around $12 billion.

Despite the sharp military spending, Israel's economy has not entered recession. However, disruptions are widespread. Civilian life has slowed, with many businesses—including restaurants—closed, and only essential workers reporting to duty. The country’s main international airport was shut for several days before partially reopening for return flights.

On Monday, S&P Global released a risk assessment of the Israel-Iran conflict but left Israel’s credit outlook unchanged. Surprisingly, Israeli stock markets rose on Wednesday, with investors betting on the resilience of the economy and a possible swift end to the hostilities. Economists point to Israel’s past ability to weather prolonged conflicts, including the 20-month war in Gaza.

However, the destruction inflicted by Iranian missile attacks is severe. Structural engineer Eyal Shalev said the damage caused by large ballistic missiles is worse than anything seen in recent conflicts. Hundreds of buildings have been destroyed or heavily damaged, with repair costs expected to run into the hundreds of millions.

Meanwhile, Ynet News also reported that Brigadier General (res.) Re’em Aminach, a former senior defence official and IDF financial consultant, estimated that Israel spent about $1.45 billion during the initial two days of combat. Of this, around $593 million went toward offensive operations, such as airstrikes and flight hours, and the rest to defensive measures like missile interception and reservist mobilisation.

“These are direct costs only,” Aminach said. “The indirect costs — including impact on GDP — cannot be measured at this stage.” The finance ministry has already lowered its GDP growth forecast for 2025 from 4.3% to 3.6% and warned that the existing emergency reserve, mostly depleted by the war in Gaza, does not account for a concurrent conflict with Iran.

Israel’s deficit ceiling for the year is 4.9% of GDP, or roughly $27.6 billion, which could now be under pressure as the war drags on.