Customers buy vegetables at a local market in the Sabra and Shatila Palestinian refugee camp in Beirut, May 6, 2026. (AP Photo/Bilal Hussein)
The U.S.-Israeli war with Iran, and the closure of the Strait of Hormuz, have sent economic shock waves across the Mideast.
In Lebanon, those woes have been compounded by the country’s existing economic problems and by largely unregulated markets that are vulnerable to price gouging.
“This continues to be a major economic shock, one of honestly an existential nature,” said Economy Minister Amer Bisat.
Since 2019, the tiny Mediterranean country has been in the throes of an economic crisis that pulverized the value of its local currency and its banking system.
That’s when Lebanese banks collapsed, which evaporated depositors’ savings and plunged about half of the population of 6.5 million into poverty, after decades of rampant corruption, waste and mismanagement.
The country suffered some $70 billion in losses in its financial sector, further compounded by about $11 billion in the 2024 war between Israel and Hezbollah, according to the World Bank. The Lebanese pound has since lost over 90 percent of its value against the U.S. dollar.
The cash-strapped state electricity company provides only a few hours of power a day, and most Lebanese rely on diesel generators to make up the difference. That makes the economy particularly vulnerable to fuel price increases.
Lebanon was already “grappling with multiple rounds of crises,” said Mohamad Faour, professor of finance at the American University of Beirut. “So this round of war only made an already fragile situation more fragile.”
With this new war, 1.2 million Lebanese have been displaced, largely from southern Lebanon and Beirut’s southern suburbs. Many are sheltering in schools with no work or draining whatever money they have renting out apartments or hotel rooms.
Bisat estimated that the country faces an economic loss of around 7 percent of its gross domestic product due to the war because “companies are closing, people are losing their jobs, tourists are not showing up.”
Prices have spiked since the U.S. and Israel launched a war against Iran on Feb. 28, followed quickly by a resurgence of war between Israel and Hezbollah.
Even consumers who can afford to spend are anxious and cutting back on nonessential purchases, leaving many businesses empty.
Riad Aboulteif, who runs several restaurants and bars in the capital, said his revenue has dropped by some 90 percent since the war began, as Lebanon’s shrinking middle class cuts costs.
People are saving more money for their survival and not making plans to celebrate birthdays or other special occasions, he said.
Meanwhile, the country’s bankrupt government has struggled to crack down on unfair and illicit profiteering and the hoarding of fuel and other essential items.
Many agricultural areas in southern and eastern Lebanon are no longer accessible because of airstrikes and clashes.
Families and businesses for years have paid multiple utility bills to cover privately supplied electricity and water in the absence of government services. Neighborhood generator owners charge a monthly fee, and some landlords have their own generators and charge the cost to tenants.
Frustrated business owners have said that generator bills have doubled at times, forcing them to shorten their hours of operation or even close on some days to cut costs.
In the meantime, the government has little ability to crack down on the handful of companies that import and distribute fuel and other goods.
With no end to the war in sight, the economic situation shows no sign of easing.
