The Economic Ramifications of Israel’s Pre-emptive Strikes on Hezbollah

In the morning of Sunday, Aug. 25, the Israeli army carried out a pre-emptive strike, launching intensive air raids with around 100 fighter jets targeting over 40 sites believed to be Hezbollah’s precision missile launch points. These sites were allegedly being prepared for strikes against Israel’s northern border in retaliation for last month’s assassination of Hezbollah’s military commander, Fouad Shukr. In response, Hezbollah launched a significant counterattack later in the morning, deploying numerous drones and firing over 320 Katyusha rockets at Israel, hitting 11 military targets. The escalation raises concerns, particularly as the Israeli government plans to allow residents to return to the northern areas they evacuated nine months ago. Should Israel fail to mitigate Hezbollah's ongoing strikes, the situation could have severe political and security repercussions for the government. This analysis examines the immediate and direct economic impacts of these mutual attacks on both sides of the border, and the potential broader consequences should the war continue and intensify.

Ismail Haniyeh, the leader of Hamas’s political bureau, was assassinated in Tehran, Iran on July 31, 2024, following his attendance of the inauguration of Iran’s new president. Iran and Hamas have accused Israel of the assassination but Israel has given no response, as is common practice when Israel is involved in an assassination. The assassination of Haniyeh followed the earlier killing of Fuad Shukr a senior Hezbollah commander in Beirut by Israel, as retaliation for an attack that left 12 dead in the Israeli-occupied Golan Heights.   Israel has stated previously that it would target Hamas officials wherever they are following October 7, and were successful in December when they assassinated Haniyeh’s deputy in Beirut, which brought ceasefire talks to a halt.   The targeting of Haniyeh who was leading negotiation efforts for a ceasefire in the Israel-Hamas War is a serious escalation, and its occurrence in the heart of Iran directly following the inauguration of Iran’s president, not only has serious implications on the Israel-Hamas War, but for Iran and its proxies as well, who have been targeted recently by Israel.   So far, Iran has not provided information on how the assassination occurred, with the Iranian Revolutionary Guard Corps (IRGC) stating that the attack is under investigation, it is likely that a precision guided missile was used to target the IRGC veteran’s mansion that he was staying in. Following the assassination, Iran's Supreme Leader Ayatollah Ali Khamenei, has pledged that Israel will face "harsh punishment" for its action in Tehran.   This is not the first time that Israel has been able to penetrate Iran’s borders to conduct assassinations, Israel has routinely been able to target Iranian officials such as its yearslong assassination campaign against Iranian nuclear experts and others involved in the Iran’s nuclear program. Most recent was the 2020 assassination of, Mohsen Fakhrizadeh, a leading Iranian military nuclear scientist, was killed by a remote-controlled machine pistol while driving outside Tehran.   Given Iran's direct and massive missile barrage against Israel in April, following the bombing of its embassy in Damascus, the world now faces significant questions: How will Tehran respond to the assassination of Ismail Haniyeh on its soil? Moreover, does Iran have the capability or incentive to contain the actions of Hezbollah and the Houthis, especially after Israel’s killing of Hezbollah’s Fuad Shukr in Beirut and its bombing of the Houthi’s Hodeidah Port?