Lebanon’s economy reels under war and global fuel crisis

Beirut, Lebanon – When Mario Habib opened his barbershop in 2006, a war between Israel and Hezbollah erupted. Two decades later, he is living through another conflict.

The barbershop has become a familiar fixture in the Furn el-Shebbak neighborhood. Mario, 51, with tattoos and short black hair, often jokes as he cuts hair for customers coming and going throughout the day. But he notices business is no longer as brisk. Israel’s war with Lebanon and the US-Israel war with Iran are ravaging Lebanon’s economy. Prices have soared due to supply issues, especially oil from the Gulf, which has largely halted since the US and Iran blockaded the Strait of Hormuz. In Lebanon, a country already suffering an economic crisis, jobs are increasingly scarce and people are losing their livelihoods.

“The cost of running the generator is killing me,” he said. “Everything is more expensive – gas prices have doubled, supermarkets are pricier, even the products for the shop have gone up.”

Lebanon’s government had been optimistic about the economy last year, when the World Bank recorded modest GDP growth of 3.5% in 2025. But with the country back in the spiral of war and the global impact of the conflict in Iran, that growth appears to have been wiped out. In March, inflation in Lebanon hit an 18-month high. Lebanon’s Audi Bank forecasts zero GDP growth in 2026 if the war continues.

However, Mario says he refuses to raise his service prices. “I always want people who come here to feel comfortable. Many things are more expensive, but I want to keep prices stable. I think when you come here, you want to have fun and relax.”

Compounding impacts

On March 2, Israel expanded its war against Lebanon. After 15 months of ceasefire violations, Hezbollah responded to Israeli attacks and the assassination of Iran’s Supreme Leader Ayatollah Ali Khamenei two days earlier. This is the second time in less than two years that Israel has expanded its assaults on Lebanon, occurring amid a cascade of other crises that economists say compound the strain on Lebanon’s economy and society.

In 2019, years of poor financial management led to a banking crisis, leaving people unable to access their own money. The currency quickly plunged, losing over 90% of its value. The 2020 Beirut port blast killed 218 people, followed by a severe deterioration of state services in 2021-2022 and a wave of mass emigration. In October 2023, war erupted between Hezbollah and Israel, displacing thousands of Lebanese, many of whom have not returned home after nearly three years. In 2024, Israel intensified attacks on Lebanon, forcing over a million people to evacuate. To survive, many businesses and families used part or all of their savings. Many lost jobs as companies closed or cut staff.

A brief economic recovery followed the November 2024 ceasefire, though thousands remained displaced from southern Lebanon. But Israeli attacks since March have shattered that recovery, with over 1.2 million people homeless, many villages in the south razed, and numerous homes and businesses in the Bekaa Valley (east) and Beirut’s southern suburbs destroyed. The US-Israel war with Iran has also driven up global prices, especially fuel, due to the blockade of the Strait of Hormuz.

Sami Zoughaib, an economist and director of research at The Policy Institute, a Beirut-based think tank, says Lebanon is experiencing “a very unique moment in economic history. This is a war after another war, after institutional collapse, after one of the worst financial crises in history.” He warns that if this trend continues, Lebanon’s economy could soon become unviable, discouraging investors from starting or running businesses.

Social fractures

The 2023-2024 war period caused significant economic losses. “Agriculture, commerce, and tourism, accounting for 77% of economic losses, are the main income sources for low-income and informal workers, and are now in danger,” according to the World Bank. In March 2025, the bank estimated reconstruction and recovery costs from the conflict at about $11 billion. In late April, Lebanon’s finance minister said war-related damage in 2026 stood at around $3 billion, but assessments are ongoing. A month later (late May), Israel continued attacks and issued daily evacuation orders, meaning total damage is expected to be much higher.

The hardest hit are the poor and most vulnerable, says Farah Al Shami, senior researcher at the Arab Reform Initiative. In 2023, remittances to Lebanon were about $6.6 billion. This year’s figure is expected to drop sharply. A 2023 UNDP report noted that oil prices strongly affect remittances, especially from GCC countries. Since March, oil prices have risen about 65% according to the World Bank, meaning many remittances from the Gulf will be impacted, says Al Shami.

In addition, Israeli attacks have deepened internal divisions in Lebanon, which political analysts say is a deliberate tactic. They say Israeli leadership believes divided neighbors are easier to control. Economists believe the economic impact on people will lead to deeper societal fractures. Zoughaib argues that Lebanon’s political elite have historically prevented working-class unity by seeking political scapegoats, and that pattern may resurface.

The displacement crisis has primarily affected Shia communities, where Hezbollah enjoys support. Israel has repeatedly attacked Shia-majority areas, pushing these communities into mixed or other homogeneous areas, even striking those areas, deepening sectarian tensions. Zoughaib warns that some political elites will stoke these fractures, blaming displaced people willing to work for lower wages for the stagnant economy – a pattern previously used to scapegoat Syrians or Palestinians. “That, to me, is very dangerous,” Zoughaib says.