Macroeconomic and geopolitical developments – Weekly report, September 8, 2025
This is the first of a new series of weekly reports in which we will review and analyze the week's geopolitical and macroeconomic developments and provide an outlook on both.
In geopolitics, the main event of the past week continued to be the government’s decision to push ahead with the conquest of Gaza City and, subsequently, the entire Gaza Strip, despite broad public opposition and objections within the military. So far, a total of about 60,000 reservists have been mobilized, with the IDF operating in the eastern neighborhoods of Gaza City. Hamas has signaled willingness for a 60‑day ceasefire including the release of 10 hostages (following the Witkoff outline), but Israel insists on a comprehensive arrangement that would include demilitarization of the Strip, the return of all hostages, and the end of Hamas rule. Prime Minister Netanyahu, facing pressure from right-wing coalition partners, is inclined to continue the war despite the risks to the hostages, as a partial deal could be portrayed as a concession and weaken him politically. In this report, we outline three possible scenarios for this situation.
In the macroeconomic arena, data released for July pointed to a notable rebound following the war with Iran. Foreign trade bounced back strongly: overall exports jumped 26.9% in July after war-related disruptions in June, while imports rose across the board with consumer goods up 36.2% and production inputs up 21.8%. Credit-card purchases also surged, increasing 19.5% in July after a 10.2% drop in June, and thus leaving them 10% above their pre-war May level. Figures for July, published yesterday, show a rebound in overall chain store sales, with a 9.5% increase compared with June, following a 7.5% decline in June. On a year-on-year basis, sales were 2.8% higher than in July 2024. Moving into August, however, business survey data point to a clear loss of momentum.
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