Israel approves 2026 budget with major defence spending amid West Asia conflict

Israel’s parliament has approved the 2026 budget early Monday, which aims to provide a significant increase in military spending, a Knesset spokesperson said in a statement allowing Israeli Prime Minister Benjamin Netanyahu’s government to head off early elections as the country continues military operations across multiple fronts.

Lawmakers have passed the budget with 62 votes in favor and 55 against it.

West Asia conflict completes one month 

The approval of the defence-heavy 699-billion shekel budget comes after the West Asia crisis has entered in the second month, with Israel also fighting against Hezbollah in Lebanon and its cost to the economy standing at about $1.6 billion a week.

“As part of the updated budget, and in light of Operation ‘Roaring Lion’, more than NIS 30 billion (about $10 billion) has been added to the ministry of defence budget, bringing it to over NIS 142 billion,” the parliament said in a statement.

Elections to be held in October 

Failure to pass the budget could have forced a snap election within 90 days, with current opinion polls indicating that Netanyahu would likely face defeat.

The election date has not been decided yet, but is due in late October.

Netanyahu has also informed that the elections can also take place in September, keeping in mind the heat of the escalating conflict.

More from World

Are Israel’s sophisticated air defence systems failing against Iran? Iran war raises a big question: Does Israel have nuclear weapons?

Heightened concerns over inflation, and rising deficits 

The budget’s last-minute passage removes a key overhang for Israel’s financial markets and economy, which has been operating since the start of the year on a pro-rated 2025 budget.

By adding another 32 billion shekels for defence, the budget deficit target was raised to some 5 per cent of gross domestic product.

This has heightened concerns about inflation, potentially delaying a return to prudent fiscal management and limiting the scope for further interest rate cuts.