The West Bank is on the edge of economic collapse

Now, after more than a year of war in Gaza, a company that traces its roots back centuries sees its future slipping away.

Production costs are up more than 20% and exports have dropped about 30%, amid Israeli restrictions on movement in the West Bank. Overall annual revenue is down from about $5 million to less than $1 million. The staff has been slashed to eight, down from 28 employees before the war. And the company is buying less olive oil, a staple of the local economy that it uses in its famed soap.

The cost of doing business has risen, Palestinian business owners say, as importing supplies and shipping products gets harder. Rising unemployment is hurting local consumers. Tourism, an important source of outside revenue, is down sharply.

“We are not just suffering—we are trying to survive," said the soap company’s owner, Mojtaba Tbeleh. “We can’t even plan by the hour, let alone the year, as we should be."

The war between Israel and Hamas was sparked after the militant group’s attack on southern Israel in October last year left 1,200 people dead and 250 held hostage. The fallout is increasingly threatening the economy in the West Bank, a separate majority-Palestinian territory a few dozen miles away, with potential destabilizing consequences for the security of Israel and the broader Middle East, senior U.S. officials have said in letters to the Israeli government.

The risk of being cut off from Israel’s financial system also looms. An Israeli waiver that allows Palestinian and Israeli banks to correspond was set to expire last Thursday, which would have severed a relationship that supports more than $13 billion in annual trade. At the 11th hour, Israeli Finance Minister Bezalel Smotrich, who says Palestinian banks are used to fund terrorism, extended the waiver for a month. The U.S. has been pressuring Israel to roll it over for at least another year and says the Palestinian Authority, which governs part of the territory, adequately manages illicit-financing risks alongside various international bodies.

“Unfortunately, the very short-term duration of this extension creates another looming crisis by Nov. 30," Secretary of State Antony Blinken and Treasury Secretary Janet Yellen said in a joint statement Thursday. “Cutting off these banking ties would create significant economic turmoil in the West Bank, threatening the security of Israel and the broader region."

The West Bank economy was relatively stable before the fighting in Gaza began last year. Israeli and Jordanian ports, though with some access challenges even prewar, served as gateways to the world for Palestinian businesses. Tourism to historic sites in Bethlehem and Jericho generated revenue. More than 100,000 Palestinians entered Israel legally for work, and relatively low unemployment kept West Bank residents spending.

All that changed after the Hamas-led attack and the Israeli military campaign that it triggered, which has killed more than 43,000 people in Gaza, mostly civilians, according to health officials there. The figures don’t state how many were combatants. Israel has tightened restrictions on movement in the West Bank, canceled more than 100,000 permits for Palestinians who worked legally in Israel, and conducted near-daily military raids, killing more than 700 people. Violence by Israeli settlers against Palestinians has increased.

The result: Every major Palestinian economic sector is shrinking, according to Palestinian officials and economic analyses. The unemployment rate in the West Bank has more than doubled from prewar levels, to an estimated 31% in the second quarter of 2024, up from about 13% a year earlier, according to the Palestinian Central Bureau of Statistics.

The Palestinian public sector, which accounts for roughly 20% of jobs in the West Bank, is also struggling. The Palestinian Authority is expected to face a nearly $2 billion budget deficit this year, according to the World Bank.

“We are taking loans to pay partial salaries," said the authority’s economy minister, Mohammad Alamour.

In the private sector, the banking waiver is a source of uncertainty. Al Arz, an ice-cream manufacturer in Nablus and mainly focused on the Palestinian and Jordanian markets, imports many of its food ingredients from around the world. The company often relies on Palestinian-Israeli banking correspondence to transfer money.

“Our suppliers are waiting to see if Israel extends the banking-correspondence waiver to make sure we will be able to pay them," said Zahi Anabtawi, chief executive of Al Arz.

The company’s shipments to Gaza have been at a standstill since Israel began its military campaign, shutting it off from a major market. And in the West Bank, people are buying less ice cream. Now the company is barely breaking even, its chief executive said, and is moving toward expanding in places such as the Seychelles, Mauritius and neighboring Middle Eastern countries that seek to support Palestinian brands.

“Ice cream is something that is considered a luxury, and people here are buying things they don’t need a lot less," Anabtawi said.

The ice-cream maker is particularly sensitive to Israeli restrictions on Palestinians’ movement in the West Bank. The product needs to be temperature-controlled and its ingredients expire quickly. The company’s hundreds of employees come from all over the West Bank, and they have at times had to sleep in the plant during street closures or waves of settler violence.

“Sometimes soldiers take all our products out of the trucks and leave them outside in the sun as they conduct searches, which we then can’t use," said Saed Anabtawi, Zahi’s brother and the company’s plant manager. “Our imports have also been delayed, and those ingredients go bad quickly. It is a logistical nightmare."

Nablus Soap, which advertises its traditional Palestinian soapmaking methods, has more than 70% of its customer base outside the Palestinian territories and Israel, according to Tbeleh, the owner. But shipments to East Asia that once took a month now take three, and late deliveries and high insurance rates have spooked foreign clients, leading some to cancel orders, he said.

“There are delays in every part of the supply chain, starting from leaving the factory," Tbeleh said, pointing toward an Israeli checkpoint a few hundred yards away that he says sometimes creates hourslong delays. Then, the soap can be held at other checkpoints in the West Bank, and later at Israeli ports on the Mediterranean Sea, or at the land crossing with Jordan.

Challenges facing businesses like the soap company’s can ripple through the economy.

“Before the war, we had difficulty finding workers because we couldn’t compete with Israeli wages," Tbeleh said. “Now, unemployed people beg us for work, but we aren’t making enough revenue to hire more staff, and we certainly can’t hire people from outside the area because of the checkpoints."

West Bank workers who used to be employed in Israel linger in the streets, seeking odd jobs. Commercial districts that once bustled are now quiet. Residents say they have noticed more youth begging, a previously rare sight.

Imad Qandeel, a Nablus resident and father of four, said he worked in Israel for nine years, most recently at a Tel Aviv bakery earning $65 a day, before his permit was canceled in October of last year.

He hasn’t found work since, aside from occasional jobs as a handyman or cleaner, working for $15 a day.

Qandeel said he is trying to make sure his four children don’t have to quit school to provide for the family, as he did when he was young. But the opportunities are limited in the West Bank and he said he doesn’t want to risk sneaking into Israel for under-the-table work, which could threaten his ability to get a work permit if restrictions ease down the road.

“The walls are closing in," he said. “There aren’t any options left."

Suha Ma’ayeh contributed to this article.