Israel’s economy contracted in the April to June quarter, with gross domestic product shrinking 3.5 percent as the war with Iran led to a shutdown of many businesses and hurt consumer spending, exports, and investment, according to a preliminary estimate by the Central Bureau of Statistics.

The decline marks the first three-month tumble since the last quarter of 2023, when the economy plunged 20.8%, as the outbreak of war with the Hamas terror group took a heavy toll on consumer spending, trade, and investment.

Israel launched a surprise campaign against Iran on June 13, saying it was acting against an imminent existential threat from the regime’s nuclear and ballistic missile programs. The 12-day war, which ended with a ceasefire that month, has dented the economy and disrupted key industries, all the while the country’s airspace largely remained closed, and thousands of workers were called into military reserve duty, affecting individuals and businesses.

Barrages of ballistic missiles sent citizens dashing in and out of bomb shelters, damaging hundreds of buildings, and leading to a complete or partial shutdown of local business and commerce during the period.

Ronen Menahem, chief markets strategist at Mizrahi Tefahot........

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