The recent conflict in Gaza has had a significant impact on Israel’s economy, particularly on its most productive sector, technology. The Israeli army’s decision to withdraw thousands of troops from Gaza and return them to their civilian lives is partly influenced by economic considerations. This move aims to alleviate the economic burden caused by the war. The tech sector, which employs around 12% of Israel’s workforce and accounts for 18% of its GDP, has been notably affected. Many tech workers were called up for military service, leading to a substantial labor shortage in the industry.
The mobilization of 360,000 reservists, the highest number for any war this century, contributed to a 2% economic contraction in the last quarter of 2023. Israeli tech companies have been managing this shortage by hiring new employees and subcontracting work. However, the war has deterred some foreign investors, particularly affecting early-stage startups that struggled to access essential investment.