Israel finance chief backs US-Iran war as $70bn conflict grows

Israel's finance minister said a US-Iran military confrontation is the most beneficial outcome for the country, as American warplanes complete an 11th day of strikes in a conflict that has already cost $70 billion.

Israeli Finance Minister Bezalel Smotrich said a direct US-Iran military confrontation serves Israel's interests above all other outcomes, as the Pentagon seeks $70 billion in supplemental funding for Operation Epic Fury.

"A direct confrontation between the United States and Iran is the most beneficial scenario for Israel's security and regional standing," Smotrich said in a statement reported by Israeli media.

The remarks come as US warplanes completed an 11th consecutive day of strikes on Iranian targets, with Defense Secretary Pete Hegseth and Joint Chiefs Chairman Gen. Dan Caine requesting a $1.5 trillion overall defense budget. Iran has retaliated by striking targets in Kuwait, Bahrain and Jordan, widening the theater of conflict beyond its borders for the first time since the ceasefire collapsed earlier this year.

For investors, the risk of a broader regional war threatens to push Brent crude above $100 a barrel and trigger sustained safe-haven flows into gold and the US dollar. The Strait of Hormuz handles 21% of global oil trade, and any disruption there would reverberate through energy markets worldwide, with Asian importers most exposed.

The Israeli finance chief's statement marks a rare public endorsement of direct US military action against Iran by a senior Israeli official. Smotrich, a far-right member of Prime Minister Benjamin Netanyahu's coalition, has long advocated for a harder line against Tehran, including strikes on its nuclear facilities. His comments come as the US-Israel alliance faces internal friction over the pace of the campaign, with President Trump privately expressing frustration that the administration missed an opportunity to avert a protracted conflict by rejecting an Iranian proposal to limit its nuclear program earlier this year.

War Costs Mount as Pentagon Seeks $1.5 Trillion Budget

The $70 billion price tag for Operation Epic Fury has already drawn scrutiny from lawmakers. Hegseth faced questions from the Senate over growing military costs, with some Democrats questioning the sustainability of a prolonged campaign. The Pentagon's broader $1.5 trillion budget request would represent a 25% increase from the previous fiscal year, driven largely by the Iran theater and modernization programs.

The last time the US engaged in sustained military operations against Iran, oil prices surged 18% over six weeks while the Cboe Volatility Index spiked above 30, according to data compiled by Bloomberg. Defense stocks outperformed the broader market by 12 percentage points during that period, while gold gained 8% as investors sought safe-haven assets.

Retaliation Widens the Conflict

Iran's decision to strike US allies Kuwait, Bahrain and Jordan marks a significant escalation. Those countries host major US military installations, and the attacks raise the prospect of a multi-front conflict that could draw in Gulf Arab states. The White House has not publicly commented on the Israeli finance minister's remarks, but the State Department has continued to emphasize that diplomatic channels remain open.

For markets, the key variable is whether the conflict remains contained to US-Iran exchanges or expands to include Israel directly. If Iran retaliates against Israeli targets, the risk premium on Middle East assets would widen further. The Israeli shekel has already weakened 3% against the dollar since the ceasefire collapsed, while Tel Aviv Stock Exchange defense shares have gained 15%.

The broader economic implications extend beyond energy. A sustained conflict at current intensity could disrupt shipping through the Suez Canal and the Strait of Hormuz, affecting supply chains for everything from semiconductors to food commodities. The International Monetary Fund has estimated that a 10% sustained increase in oil prices would reduce global GDP growth by 0.3 percentage points over the following year.

This article is for informational purposes only and does not constitute investment advice.