$11 billion and counting: The true cost of Israel’s war with Iran and Hezbollah
Civilian damages and hidden spending push total far beyond official figure.
The Ministry of Finance estimates that the defense establishment’s direct costs in Operation “Roaring Lion” amounted to just NIS 22 billion (approximately $7.2 billion). This is despite the fact that the government and the Knesset approved a base budget increase of NIS 32 billion (about $10.5 billion) for defense, along with an additional NIS 7 billion (around $2.3 billion) contingent on proof that further funding is required.
On the surface, the announcement appears positive, even encouraging, suggesting that the war was less expensive than initially feared. However, a closer reading, combined with an understanding of the ongoing budgetary tensions between the Ministry of Finance and the Ministry of Defense, reveals a more complex reality.
First, nowhere in the Ministry of Finance’s announcement does it indicate any intention to “return” unused funds, that is, to revise the state budget downward or reduce defense spending by the apparent gap of roughly NIS 17 billion (approximately $5.6 billion), by foregoing the reserve and cutting the base increase. Indeed, in response to a question from Calcalist, the Ministry clarified that it does not intend to reopen the budget.
Second, the Ministry of Finance explicitly notes that this is a “preliminary estimate subject to updated data,” leaving open the possibility that the Ministry of Defense will ultimately present a higher and more comprehensive bill.
More importantly, the announcement focuses solely on the direct costs of the operation. In practice, the defense budget increase tied to “Roaring Lion” extends well beyond the operation itself. Within the Ministry of Defense, the additional funding is internally divided into two categories: “return to base” and “war budget.” The former reflects long-standing dissatisfaction with the original NIS 112 billion (about $36.6 billion) allocation in the 2026 budget. From the defense establishment’s perspective, the war provided an opportunity to correct what it viewed as an underfunded baseline.
As in previous operations, including “Rising Lion,” budget increases were justified not only by operational needs but also by structural adjustments. The defense establishment argued, for example, that the number of reserve soldiers mobilized in early 2026 exceeded Treasury forecasts. In addition, Prime Minister Benjamin Netanyahu pushed through an extra NIS 4 billion (approximately $1.3 billion) for defense that was not directly tied to the operation.
This raises the question: why is the Ministry of Finance emphasizing that “the direct military cost” of the operation was only NIS 22 billion (about $7.2 billion), when total defense allocations increased by at least NIS 32 billion (around $10.5 billion)?
The answer lies in the broader budgetary struggle between the two ministries. The Ministry of Defense is expected to demand the full NIS 39 billion package (approximately $12.7 billion), including the NIS 7 billion ($2.3 billion) reserve set aside in case of escalation. Its argument will likely be that the conflict lasted longer than anticipated, extending into April, and that the northern front, particularly in Lebanon, proved more complex than expected.
The Ministry of Finance, for its part, is attempting to preempt this claim. By stressing that the direct cost of the war was only NIS 22 billion (about $7.2 billion), it is effectively signaling that the threshold for unlocking the reserve has not been met. Under current budget rules, access to these funds requires proof that direct war-related expenses exceed the allocated baseline.
The Ministry of Finance also provided an initial estimate of civilian damages on the home front, placing them at approximately NIS 12 billion (around $3.9 billion). This figure includes compensation for individuals and businesses directly affected by the conflict, indirect support for businesses in the north, business continuity grants for companies experiencing reduced activity, and severance payments for employees placed on unpaid leave during the war. A significant portion of these payments will be drawn from the national compensation fund.
Beyond the combined NIS 34 billion (approximately $11.1 billion) in direct military and civilian costs, an additional roughly NIS 1 billion (about $330 million) has been distributed across various government ministries and agencies to address war-related needs. Altogether, the Ministry of Finance currently estimates the immediate fiscal cost of the war at around NIS 35 billion (approximately $11.4 billion).
However, this figure does not capture the broader economic impact. Indirect costs, including lost GDP, reduced tax revenues, future increases in defense spending, higher interest payments, and long-term rehabilitation, remain outside the current calculation and could significantly raise the overall price of the conflict.
