Analysts estimate a 30% chance of escalation in the ongoing conflict between Israel and Hezbollah along the Lebanese border, as per a report issued by BMI Country Risk And Industry Research.

Despite a 70% likelihood that the conflict will not intensify, BMI analysts suggest that if it does, there is an 80% probability that U.S. pressure will lead to a ceasefire.

The probability of the conflict spreading to other parts of Lebanon is estimated at 20%, with Hezbollah potentially extending its attacks deeper into Israel, including targeting gas infrastructure.

Looking ahead to 2025, assuming the conflict ends, the economic outlook for the Levant appears positive, with anticipated growth of 4% driven by post-war reconstruction and increased economic and shipping activities, according to BMI.

Mariette Kas-Hanna, a senior country risk analyst, warned that a broader war would be highly costly for both sides, exacerbating socio-economic problems in Lebanon and heightening domestic political tensions.

“The contained fighting is therefore more likely to be sustained, enabling Hezbollah to achieve its objectives while shifting some of the Israeli Defence Force (IDF) focus from Gaza to the Lebanese border, and increasing the pressure on Israel to agree on a ceasefire in Gaza without severe public backlash inside Lebanon,” she said.

Kas-Hanna noted that a broader conflict with Hezbollah would result in heightened domestic tensions and greater economic and military losses for Israel. Israel’s already stretched military capabilities would face additional strain, as Lebanon is better equipped than Hamas and experienced in urban warfare, potentially causing substantial damage to Israel, including critical gas infrastructure.

Kas-Hanna also highlighted that in the event of a wider war, Hezbollah would not be fighting alone, as pro-Iran or pro-Palestinian groups would join its ranks, increasing attacks from areas like Iraq and Syria.

“Key foreign powers in the region, namely the US and Iran, are not in favor of an escalation that could eventually drag them directly into the war, especially when their domestic political situations are requiring great attention and focus,” she added.

Ramona Moubarak, head of MENA country risk, stated that BMI maintains its view that the Gaza-Israel conflict is unlikely to escalate into a full-scale military confrontation involving Iran-backed groups in Lebanon, Iran, Yemen, or Syria.

The ongoing conflict has negatively impacted growth forecasts for the Levantine economy. Initially, BMI projected a 1.7% growth rate for 2024, which has now been revised down to 0.8%.

In Lebanon, the economy is projected to contract by 1.5%, as the high likelihood of escalating conflict with Israel weighs heavily on the crucial summer tourism season, which has become vital for the economy since the 2019 crisis.