Lebanon’s already struggling economy has suffered yet another setback following the outbreak of hostilities between Israel and Iran, just as the country was preparing for a potentially strong summer tourism season. Now, with the skies over the region lit up by missile fire and with fears mounting over a protracted conflict, key questions loom over how Lebanon’s ailing economy will fare under different war scenarios.

The painful economic shockwaves of the 2024 conflict had just begun to subside. Signs of recovery were emerging, buoyed by bold political stances taken by the newly elected administration under President Joseph Aoun, a genuine reform drive, and a promising outlook for the 2025 summer season.

Lebanon had entered the year with cautious optimism. Restaurants were reopening—191 new establishments had launched in the first few months of 2025 alone—and the tourism sector was gearing up for a potentially lucrative summer. The upbeat mood even prompted the World Bank to forecast a 4.7% GDP growth rate.

Speaking to Nidaa Al Watan, Mohammad Choucair, head of Lebanon’s economic bodies, said growth might have exceeded the World Bank’s forecast, possibly reaching 5%, had the security situation remained stable.

“Retail sales in May alone rose between 10% and 12% compared to the same month last year,” Choucair noted. “The momentum continued into early June, and had the Israeli strike not happened, economic growth could have surpassed 5%, especially given the high expectations for the summer season and the end-of-year holidays.”

The commercial sector had also begun showing tangible improvement, particularly in retail, while the tourism industry was anticipating an influx of visitors—largely due to renewed political confidence in the post-election period.

With the current Israeli-Iranian conflict unfolding and uncertainty surrounding its duration and scope, economists are now recalculating Lebanon’s growth prospects.

“The positive indicators, from state control over all Lebanese territory to renewed ties with the Gulf and structural reforms aimed at rebuilding trust, had suggested Lebanon could achieve 6% growth if stability held,” economist Nassib Ghobril told Nidaa Al Watan. “That would have brought the economy back to its pre-crisis size of $54 billion.”

Yet, Ghobril cast doubt on the 4.7% forecast, calling it “exaggerated.” Even under optimal conditions, he estimated growth would likely range between 2% and 3%.

Ghobril cited slow implementation of reforms despite good intentions from the executive branch.

“There was clear political will to take serious measures, but the pace has not matched expectations. Instead, much of the hope for growth hinged on a successful tourism season,” he said.

Scenarios Ahead: From Contained Conflict to Catastrophe

As the war between Israel and Iran unfolds, Lebanon’s fate hangs in the balance. Ghobril outlined three potential scenarios:

Scenario 1: A Short War
If international mediation halts the war within a few days, the impact on Lebanon could be limited.

“We would expect Lebanese expatriates to delay their visits from June to July or August, just as they did last year. If the conflict ends quickly and the summer season holds, growth could still reach 3% to 3.5%,” Ghobril said.

Scenario 2: A Prolonged But Contained Conflict
Should the conflict last several weeks but Lebanon remain out of the direct line of fire, the economic impact would still be significant, especially in the tourism sector.

“Expatriates from distant countries like Australia or North America might cancel their trips altogether,” Ghobril warned.

Tourism plays a vital role in Lebanon’s economy. In 2023, revenues had reached $5.6 billion by October 7, when the “support war” broke out. But in 2024, that figure dropped by 16% to $4.7 billion due to Israel’s war against Hezbollah. Tourism’s share of GDP fell from 24% in 2023 to 16% in 2024. A prolonged Israeli-Iranian war in 2025 could deal a similar blow.

This would be a “missed opportunity,” Ghobril said, which is why international actors have urged Lebanese authorities to accelerate structural reforms.

“With global attention shifting to other crises, the focus on Lebanon will inevitably decline. The international community will turn its attention to containing the war and preventing oil prices from soaring to new highs.”

Scenario 3: Lebanon Gets Dragged In
The most dire scenario involves Lebanon being dragged directly into the conflict or becoming a battleground for regional proxy wars.

“An expansion of the conflict would have devastating consequences for Lebanon’s economy and society. We’re still dealing with the fallout from the 2024 war, and this would be catastrophic,” Ghobril warned.

A renewed conflict on Lebanese soil would crush any remaining economic momentum, mirroring the steep contraction witnessed in 2024. Even if Lebanon remains on the sidelines, the region’s instability will likely stall reform efforts and delay investment.

“People looking to buy homes, cars, or other non-essential goods will likely hold off until there’s more clarity,” he said. “That will further slow economic activity.”

A Narrow Silver Lining

Amid all the gloom, Ghobril pointed to a single silver lining: rising gold prices. As a safe-haven asset during times of war, gold has surged in value, boosting Lebanon's gold reserves. These now exceed $30 billion, up from $15 billion in 2019.

However, as Ghobril pointed out, these gains are largely theoretical since the gold is not being liquidated or used to support the economy directly.

“The country doesn’t benefit from the increase unless the gold is monetized, which is not currently the case,” Ghobril noted.

The latest crisis highlights Lebanon’s urgent need to push forward with long-delayed structural reforms. As international attention shifts to managing the broader regional fallout and containing oil price spikes, Lebanon risks being left behind once again.

For now, the country stands at a crossroads: either act decisively to protect its economy and sovereignty or brace for another lost year.