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Economy
May 22, 2026
Analyzed by Glm 4.5 Air:Free

Lebanon's Economy Collapses Under Weight of Regional Conflict and Fuel Crisis

AI Summary
Lebanon's economy, showing modest growth in 2025, is now facing collapse due to renewed conflict with Israel and global fuel shortages. With inflation reaching 18-month highs and GDP growth projected at 0% for 2026, ordinary Lebanese citizens like barber Mario Habib are struggling with rising costs and reduced business.

The Economic Crisis in War-Torn Lebanon

Beirut, Lebanon – Mario Habib, a 51-year-old barber who opened his shop in 2006 just before war broke out between Israel and Hezbollah, is now living through another conflict. Twenty years later, his business in Furn el-Shebbak neighborhood is struggling as Lebanon's economy deteriorates under the weight of renewed war and global fuel crisis. "The price of running the generator is killing me," Habib said. "Everything has gotten more expensive, the price of petrol doubled, the supermarket is more expensive, even the products [I use for my business] got more expensive."

Regional Conflict Disrupts Fuel Supplies and Economic Growth

Israel's war on Lebanon and the broader US-Israel war on Iran are severely damaging Lebanon's fragile economy. Supply issues have particularly affected oil from the Gulf region, which has largely stopped flowing since the US and Iran blockaded the Strait of Hormuz. In Lebanon, which was already suffering from a severe economic crisis, there is less work and people are losing their jobs at an alarming rate.

Despite Lebanon's government expressing optimism about the country's economy in 2025, with the World Bank recording a modest 3.5 percent GDP growth that year, the renewed conflict has erased those gains. In March 2026, inflation reached an 18-month high in Lebanon. Lebanon's Bank Audi now predicts that there will be 0 percent GDP growth in 2026 if the war continues.

Economic Indicators Show Deteriorating Conditions

  • Inflation reached an 18-month high in March 2026
  • Bank Audi projects 0% GDP growth for 2026 if war continues
  • Lebanon had recorded 3.5% GDP growth in 2025
  • Reconstruction and recovery costs estimated at $11bn by World Bank
  • War-related losses in 2026 estimated at $3bn (with more expected)
  • Oil prices have increased approximately 65% since March

Compounding Crises Create Perfect Economic Storm

Lebanon's current economic crisis is not solely the result of recent conflicts. The country has been facing multiple compounding crises for years:

  • 2019: Financial mismanagement led to a banking crisis, cutting people off from their savings
  • 2020: Beirut port explosion killed 218 people and devastated infrastructure
  • 2021-2022: Worsening state services and mass emigration
  • 2023-2024: Hezbollah-Israel war displaced thousands of Lebanese
  • 2024: Israel intensified attacks, displacing more than one million people
  • 2026: Renewed Israeli attacks have displaced over 1.2 million people

"This is a war that comes after a war," said Sami Zoughaib, an economist and research manager at The Policy Institute, a Beirut-based think tank. "It comes after institutional collapse. It comes after one of the worst financial crises in history."

Societal Impact and Economic Vulnerability

The economic crisis is disproportionately affecting Lebanon's most vulnerable populations. According to the World Bank, agriculture, commerce, and tourism—sectors accounting for 77 percent of economic losses—are key income sources for low-wage and informal workers now at significant risk.

Remittances, which were approximately $6.6bn in 2023, are expected to drop significantly in 2026 due to rising oil prices. The 65% increase in oil prices since March particularly affects remittances from Gulf countries, which are crucial to Lebanon's economy.

The displacement crisis has mostly impacted Lebanon's Shia community, from which Hezbollah draws its support. However, economists warn that the economic fallout could exacerbate societal divisions, with political elites potentially scapegoating displaced people for the country's economic problems—a pattern seen in the past with Syrians and Palestinians.

Future Outlook: Economic Collapse or Recovery?

Should the current pattern of conflict continue, Lebanon's economy could soon become unviable, with many investors deciding that opening or operating businesses is not worth the potential returns. The impact has been felt across the country, with no community left untouched by the economic consequences of war.

While some areas have been hit harder than others, economist Sami Zoughaib warns that Lebanon may be reaching a point of no return. "That is, for me, very dangerous," Zoughaib said, referring to the potential for political elites to exploit economic divisions for their own gain.

For ordinary Lebanese citizens like Mario Habib, the immediate concern is survival. Despite rising costs and reduced business, Habib refuses to raise his prices. "I always prefer that the person who comes here is comfortable," he said. "A lot of things are more expensive, but I prefer to be conservative on this. I feel like if you come to me, you want to be happy and relaxed."