Iran war talk sends jitters through Israel economy

If Israel were to mount a military strike on Iran’s nuclear facilities, some fear the ensuing conflict could deal a costly blow to the Jewish state’s struggling economy, despite claims by bank officials.

Talk of an imminent strike has dominated the press recently, but the Israeli establishment has remained tight-lipped, with only Bank of Israel Governor Stanley Fischer speaking publicly on the issue.

He insisted the central bank had contingency plans.

“One could imagine a situation of a wide-scale war with which it could be very difficult to deal,” he said in a TV interview.

“We are ready to deal with the consequences of any event. We are prepared for all kinds of crises, we are prepared for a major crisis, for a far worse security situation,” Mr Fischer said, without elaborating.

“It’s not my job to frighten anyone,” he said, while pointing out that such a conflict would need an increased defence budget.

“The main responsibility of any country is to ensure the security of the state and if there is a need to spend more money on national defence, we’ll need to do that and to pay for it,” Mr Fischer said.

A central bank official said Israel had a “comfortable” foreign exchange reserve of $75.3 billion (€61.28 billion).

“This gold mine should allow us to smoothly finance our imports in case of war and if necessary defend the shekel,” he said, on condition of anonymity.

The Manufacturers Association of Israel, the umbrella organisation of Israeli industry, said: “Right now, business leaders are more concerned about the risks of recession caused by the euro crisis.”