Can Lebanon’s Shattered Economy Handle a War with Israel?

The intense exchange of fire between Hezbollah and the Israeli military is raising concerns about the possibility of a broader regional conflict extending beyond their already tense border.

Lebanon faces much greater risks now compared to 2006 when a monthlong war with Israel ended in a stalemate. The country has been weakened by years of political instability and economic crises, leaving it heavily indebted, with unreliable electricity, a dysfunctional banking system, and widespread poverty. With Hezbollah’s military capabilities now significantly stronger, there are fears that a new conflict would be even more destructive and prolonged.

The question is: Can Lebanon withstand such a conflict?

 

Preparing for a Repeat of 2006—or Worse

Since Hezbollah and Israel began exchanging rockets and drones following the start of the Israel-Hamas war in Gaza on October 7, the fighting has mostly been confined to border areas. However, with the possibility of a wider war looming, Lebanon has been urgently equipping hospitals and preparing public schools as shelters for those seeking refuge.

After a rare Israeli airstrike in southern Beirut last month killed a senior Hezbollah commander, there was a flurry of meetings between humanitarian organizations and the Lebanese government, according to Laila Al Amine, who leads the Beirut office of the international relief organization Mercy Corps. The Lebanese government, along with U.N. agencies, has developed a comprehensive response plan this month that outlines two possible scenarios: a limited escalation similar to the 2006 war, which could displace about 250,000 people, and a worst-case scenario of “uncontrolled conflict” that could displace over 1 million people.

The U.N.-drafted plan, obtained by The Associated Press, estimates a monthly cost of $50 million in the case of limited escalation and $100 million for an all-out war. The Lebanese government has stated that funding for this emergency will rely on creditors and humanitarian aid organizations. However, they are already struggling to find the $24 million needed each month to support the 100,000 people currently displaced and an additional 60,000 living in conflict zones.

 

Desperate for Aid Amid Economic Crisis

Lebanon’s decades of corruption and political paralysis have left its banks barely functional, and electricity is almost entirely provided by private diesel generators. Public services depend heavily on aid groups and international donors to operate at a minimal level. Many Lebanese, who once lived in relative comfort, now rely on food and financial aid to survive.

The situation worsened after the COVID-19 pandemic in 2020 and the massive Beirut port explosion that destroyed large parts of the capital. Despite the need for painful reforms to secure an International Monetary Fund bailout, Lebanon’s banks and ruling elite have resisted such changes. Meanwhile, the country’s infrastructure has continued to deteriorate, and living conditions have worsened.

Tourism, which officials hoped would help revive the economy, has also been negatively impacted by the border conflict with Israel. Additionally, Lebanon is hosting over 1 million Syrian refugees who fled the conflict in their country. Health Minister Firas Abiad recently told the AP that Lebanon’s health system is ill-equipped to handle an additional population in the event of an all-out war, especially as international funding for Syrian refugees continues to decline.

In April, Environment Minister Nasser Yassin stated that Lebanon had only half the money needed to address the conflict and the resulting humanitarian needs.

 

Logistical Challenges in a New Conflict

In 2006, Israel bombed the runways of Lebanon’s only airport, effectively shutting it down, and imposed an air and sea blockade. The bombardment also destroyed critical infrastructure and flattened neighborhoods, resulting in damage and losses estimated at $3.1 billion, according to the World Bank.

Despite these challenges, aid groups were eventually able to deliver supplies through the country’s ports and the limited runway space that remained at the airport. The U.N. noted that their relief efforts during the war were not in response to a humanitarian crisis, as people did not die from poor sanitation, hunger, or disease, but from bombs and shells.

Many Lebanese were able to flee to neighboring Syria, but with Syria now devastated by its own civil war, it is unclear how easy it would be for civilians and aid groups to cross the border this time.

Additionally, the Beirut port, which has not been fully rebuilt since the 2020 explosion, may not have sufficient capacity to handle a larger conflict. The port’s damaged grain silos collapsed in 2022, and Lebanon currently relies on minimal food storage due to its ongoing financial crisis.

“Lebanon apparently has stocks of food and fuel for two to three months, but what happens after that?” Al Amine asked. “We only have one airport, and we can’t transport things through our land borders. It would be difficult to bring supplies into the country.”

 

A Stronger Hezbollah

In 2006, Hezbollah reportedly had around 15,000 rockets in its arsenal. According to Dina Arakji, associate analyst at U.K.-based risk consultancy firm Control Risks, more recent unofficial estimates suggest that this number has increased nearly tenfold. Hezbollah has also acquired more advanced weaponry, including precision missiles, Iranian arms, as well as Chinese and Russian weapons.

The group has also expanded its drone capabilities, against which Israeli air defenses are less effective. Hezbollah relies on a network of Iran-backed allied groups that could join the conflict if it escalates.

Lebanese officials and international diplomats hope that a cease-fire agreement in Gaza will lead to a calming of tensions in southern Lebanon. Hezbollah has indicated that it will stop its attacks along the border if a cease-fire is reached in Gaza.