CHIYAH, Lebanon (AP) — Ayman al-Zain stood watching as heavy machinery removed debris from what remained of his athletic apparel shop, one of many structures leveled during Israeli attacks targeting the Hezbollah militant organization.
With a fragile ceasefire now reducing but not eliminating hostilities, Al-Zain considered whether to reconstruct his business in Beirut’s southern neighborhoods that he had planned to leave to his children. However, rebuilding appears unlikely in the near term, and not solely due to concerns about additional air attacks.
“Everything is expensive,” he explained to The Associated Press. “If I want to open a new store and get mannequins, hangers and some accessories, the prices are very different than before.”
The conflict between the U.S. and Israel against Iran, along with the blocking of the Strait of Hormuz, has created financial turbulence throughout the Middle East. Lebanon’s difficulties have been magnified by pre-existing economic troubles and largely uncontrolled markets susceptible to exploitation.
“This continues to be a major economic shock, one of honestly an existential nature,” stated Economy Minister Amer Bisat, a member of the Lebanese Cabinet that assumed power more than a year ago with reform objectives.
Beginning in 2019, the small Mediterranean nation has endured an economic catastrophe that devastated its local currency’s worth and destroyed its banking infrastructure.
Lebanese financial institutions failed at that time, wiping out depositors’ funds and forcing roughly half of the 6.5 million residents into poverty, following years of widespread corruption, waste and poor governance. The nation experienced approximately $70 billion in financial sector damages, further increased by roughly $11 billion from the 2024 conflict between Israel and Hezbollah, according to the World Bank. The Lebanese pound has subsequently declined more than 90% of its strength versus the U.S. dollar.
The financially struggling state power company delivers just a few hours of electricity daily, forcing most Lebanese to depend on diesel-powered generators for additional power. This situation makes the economy especially susceptible to fuel cost increases.
Lebanon was already “grappling with multiple rounds of crises,” explained Mohamad Faour, professor of finance at the American University of Beirut. “So this round of war only made an already fragile situation more fragile.”
During this latest conflict, 1.2 million Lebanese citizens have been forced from their homes, primarily from southern Lebanon and Beirut’s southern districts. Many are taking refuge in educational facilities without employment or depleting their remaining funds on apartment rentals or hotel accommodations.
During an AP interview at his workplace, Bisat calculated that the nation confronts economic damages of approximately 7% of its gross domestic product from the war because “companies are closing, people are losing their jobs, tourists are not showing up.”
Signs of rising costs are everywhere.
At the typically busy fresh food market in Sabra, south of Beirut, seller Ahmad al-Farra appeared discouraged as an older woman shopping for watermelon, tomatoes and potatoes left empty-handed after seeing the costs.
Costs have surged since the U.S. and Israel began their war against Iran on Feb. 28, quickly followed by renewed fighting between Israel and Hezbollah.
“We’re keeping our prices low so we can sell, and even then we’re not selling,” al-Farra explained as an Israeli drone buzzed overhead.
Even customers with spending power are worried and reducing non-essential buying, leaving many establishments nearly empty.
Riad Aboulteif, who operates multiple restaurants and bars in the capital, reported his income has fallen by approximately 90% since hostilities started, as Lebanon’s diminishing middle class reduces expenses.
Citizens are preserving more funds for basic needs and avoiding plans for birthday celebrations or other special events, he noted at one of his establishments in Beirut’s busy Hamra area, where lively customer conversations once drowned out the jazz music from the speakers.
That evening, only a handful of tables had patrons. He has been forced to reduce employees and modify his menus to provide more budget-friendly options.
At the same time, the nation’s financially ruined government has found it difficult to stop unfair and illegal profiteering and the stockpiling of fuel and other vital supplies.
Numerous farming regions in southern and eastern Lebanon are now unreachable due to airstrikes and fighting, but al-Faraa suspects suppliers have increased costs beyond what’s needed to cover expense rises.
Some of the most dramatic price increases have occurred with generator charges.
Households and businesses have for years paid several utility bills to cover privately provided electricity and water due to absent government services. Local generator operators impose monthly fees, and some property owners maintain their own generators and pass costs to renters.
Angry business operators report that generator expenses have sometimes doubled, compelling them to reduce operating hours or close on certain days to lower costs.
“If we didn’t take these measures, we cannot continue,” Aboulteif stated.
Bisat noted his ministry has performed more than 4,000 inspections of private generators, fuel stations and stores nationwide since the war started in March and filed numerous court complaints. However, the problem will not be rapidly solved.
Currently, the government has limited capacity to control the small number of companies that import and distribute fuel and other products.
With no war conclusion visible, the economic circumstances show no indication of improvement.
A fragile ceasefire exists between the U.S. and Iran, but discussions between Washington and Tehran have stalled. A temporary truce between Israel and Hezbollah has decreased but not eliminated fighting in Lebanon.
For the present, Lebanese families and business operators are addressing the difficulties daily while hoping for improvement.
“Only God knows how we’ve been trying to manage ourselves,” al-Farra stated.
