War and Iran conflict deepen Lebanon’s economic crisis, officials say

Ayman al-Zain watched as a bulldozer cleared the rubble of what used to be his sports clothing store in Beirut’s southern suburbs, a building that was among dozens damaged in Israeli strikes tied to Hezbollah. With fighting reduced but not halted under a nominal truce, he said he is trying to decide whether it makes sense to rebuild now—or whether the next round of airstrikes will make the investment pointless.

For many in Lebanon, the decision is less about rebuilding plans than about costs that keep moving. “Everything is expensive,” al-Zain told The Associated Press, describing how the prices for basic items needed to reopen a store—like mannequins, hangers and other accessories—have changed from before the latest escalation. He and other residents described a market environment where prices have spiked and where fear of additional strikes adds uncertainty to any attempt at restarting normal life.

Lebanon’s economic slide has roots far earlier than the current conflict. Since 2019, the country’s crisis has “pulverized” the value of the local currency and its banking system, according to the AP reporting. The World Bank estimate cited by AP put financial-sector losses at about $70 billion, and the breakdown of banks evaporated depositors’ savings, pushing about half of the population of roughly 6.5 million into poverty. AP also said Lebanon’s banking system and broader economy have been further stressed by earlier war impacts, including about $11 billion in losses during the 2024 conflict between Israel and Hezbollah.

The current fighting also arrives as Lebanon’s state services are already limited. AP reported that the cash-strapped electricity company provides only a few hours of power a day, leaving many residents dependent on diesel generators. That arrangement can magnify the impact of fuel price increases because households and businesses must pay multiple utility bills and other fees in the absence of reliable grid power.

Economy Minister Amer Bisat, speaking in an interview with AP from his office, estimated the country faces an economic loss around 7% of gross domestic product because of the war, with companies closing, people losing their jobs and tourists not coming. AP also reported that Bisat framed the shock as “one of honestly an existential nature,” reflecting both the severity and the scale of the disruption for an economy already weakened by years of crisis.

The effect is visible across daily purchases and revenue, AP reported. In a produce market in Sabra, south of Beirut, vendor Ahmad al-Farra said customers were walking away after checking price tags, and he described prices as rising since the U.S. and Israel launched a war against Iran on Feb. 28, followed by renewed fighting between Israel and Hezbollah. In Beirut’s Hamra district, where restaurants and bars have long depended on regular foot traffic, Riad Aboulteif said his revenue dropped by about 90% since the war began, forcing him to downsize staff and restructure menus to offer more affordable items.

Beyond the immediate impact on sales, AP reported that the war is also affecting work and mobility, including access to agricultural areas. Agricultural regions in southern and eastern Lebanon were described as no longer accessible due to airstrikes and clashes, while suppliers raised prices beyond what local businesses consider necessary to cover costs. AP further said the most pronounced increases have shown up in generator bills: neighborhood generator owners charge monthly fees, landlords sometimes require tenants to cover generator costs, and business owners said generator expenses have doubled at times—driving some to cut hours or close on some days to contain costs.

Bisat said his ministry has tried to respond by monitoring private fuel and power arrangements. AP reported that his ministry conducted over 4,000 inspections of private generators, gas stations and shops since the start of the war in March, and lodged dozens of complaints to the courts. Even so, AP said the government has limited ability to crack down on the small number of companies that import and distribute fuel and other goods.

For now, AP said there is no clear sign of relief on the horizon. A tenuous ceasefire between the U.S. and Iran is in place, but talks between Washington and Tehran remain gridlocked, and the Israel-Hezbollah truce has reduced but not stopped the fighting in Lebanon. Lebanese families and business owners continue to manage the situation day by day, with al-Farra describing the effort as one he and others feel they are making “to manage ourselves,” while waiting to see what comes next.