Opinion

Israel and Iran Will Both Lose if They Go to War

The short conflicts Israel has grown used to are a thing of the past: A conflict with Iran will almost certainly cost the economy dearly

An Iranian Officer of Revolutionary Guards, with Israel flag drawn on his boots, is seen during graduation ceremony, held for the military cadets in a military academy, in Tehran, Iran June 30, 2018
\ TASNIM NEWS AGENCY/ REUTERS

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What’s on the collective Israeli mind these early days of August?  The incendiary balloons that are wafting over from Gaza, Druze army officers resigning in protest over the Nation-State Law, LGBT rights, and how to survive the last weeks of summer vacation until the kids head back to school.

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On the Tel Aviv Stock Exchange the mood has been bearish, but that’s because of the collapsing technology stocks on Wall Street and the latest Twitter salvo fired by Trump in his trade war with China.

What seems to be further from everyone’s minds is Iran, and the growing possibility that Israel could find itself in a war with the Islamic Republic.

We’ve been in a gradually heating up cold war with Iran in Syria, repeatedly hitting Iranian military targets without suffering the response likely to come.

Meanwhile, Tehran, feeling the sting of Trump’s sanctions and his trash-talking tweets, has threatened to close the Strait of Hormuz and is reportedly readying to start proactive military exercises there.

In the Red Sea, Houthi militants allied with Iran fired missiles at two Saudi tankers last week, prompting the Saudis to suspend shipping and for Netanyahu to warn Iran that Israel would join an international coalition to prevent the Bab al-Mandab from being closed.

When a proxy fires missiles

My guess is that this is tough talk aimed at mutual intimidation - rather than the lead-up to an actual military confrontation. Tehran has traditionally employed inflammatory rhetoric, and it’s now met its match with an American president who responds in kind. 

The problem isn’t that anyone – Iran, the United States or Israel – wants this to spill into open fighting, but it could happen. If Washington or Tehran assumes that the other side doesn’t want war, leaders will feel freer to push the envelope a little further – a vague threat becomes more specific, an incident like a tanker is stopped in the Gulf or (as may have been the case in the Red Sea) you let a proxy do something provocative like fire off a few missiles.

Iran’s leaders may even feel that with their economy crumbling and the streets restless, a little war might be a way out – if not with the U.S., maybe with Israel. It would rally the masses of Iranians and maybe enable Tehran to enter into negotiations with Washington with some honor.

There are so many possible scenarios for how this could happen and in what form, but in any case, the risks for Israel are huge. Since the 2006 Lebanon war, we’ve gotten used to the idea that missile wars are not an existential threat to Israeli lives or to the economy, especially with Iron Dome there to defend us. But as the army explained to the cabinet a few weeks ago, the next missile war is likely to be on a much bigger scale than the ones that preceded it.

The most likely scenario isn’t a direct attack by Iran but one by Hezbollah, which is estimated to have as many as 130,000 missiles in Lebanon, 90% of which are capable of reaching as far south of Haifa. Most homes in Israel don’t have effective defense against a missile strike, nor does most critical infrastructure. The army knows that Iron Dome cannot provide an effective defense against hundreds of missiles launched in a single day. And, if Hamas decides to open a second front from Gaza, the home front situation becomes more dire.

Civil defense in such a war will mean evacuating hundreds of thousands of people within missile range, causing huge economic disruption. 

It will also mean shutting down the Tamar offshore oil rig that supplies a critical of the fuel used to generate Israel’s electricity. Israel would have to resort to scheduled power outages to cope with the fuel shortage, creating more economic disruptions.

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Economically, Israel could probably come out unscathed from a short war, assuming that it doesn’t result in heavy casualties or material damage. But a longer conflict would be much more problematic – it could not only do considerable direct damage but undo Israel’s reputation as a Teflon economy when it comes to war.

Investors would give second thought to putting money here and tourism would be dealt a fatal blow. The bill for cleaning up could weigh on the economy for years. For the world economy, there’s risk as well, if Iran chooses to bring the fight to the Gulf and/or the Red Sea. That would be logical as they are only places where it could expect to have a real impact:  About a fifth of the world’s oil passes through the Strait of Hormuz and the Red Sea accounts for another big chunk of the traffic.

Iran doesn’t have the naval capability to seal the straits for a prolonged period, but between its arsenal of speed boats and mines, it could close the passage for brief periods and create enough insecurity to deter tankers from risking the journey even when it is open. In the Red Sea, such tactics have already caused the Saudis to stop tanker traffic. 

If Iran manages to disrupt the flow of oil, prices could shoot through the roof, breaking the 2008 record $147 a barrel. Some of the most Gulf- dependent countries might not be able to get oil at any price. The world economy, which is already being shaken by the trade wars, could find itself spinning into a recession.