Israel’s Knesset Passes 2026 Budget, Preventing Early Elections

Israel's parliament has approved a defense-focused budget worth 699 billion shekels for 2026, allowing Prime Minister Netanyahu's government to avoid snap elections. The budget passage comes as Israel continues military operations against Iran and Hezbollah, with war costs reaching $1.6 billion weekly.

Israel’s Knesset voted to approve the nation’s 2026 budget early Monday morning, according to a parliamentary spokesperson, preventing Prime Minister Benjamin Netanyahu’s administration from facing potential snap elections while the country remains engaged in military conflicts with Iran and operations in Lebanon.

The defense-focused spending plan totals 699 billion shekels and was passed one month into Israel’s ongoing military operations, which include fighting against Hezbollah forces in Lebanon. The economic impact of these conflicts has reached approximately $1.6 billion per week.

Had lawmakers rejected the budget proposal, Israel would have faced mandatory early elections within 90 days – a scenario that polling data suggests Netanyahu would likely lose.

While regular elections are scheduled for late October, no specific date has been confirmed. Netanyahu has indicated the vote could potentially occur in September.

The budget’s approval at the final hour eliminates significant uncertainty for Israel’s financial markets and economic outlook, which had been functioning on an extended 2025 budget since January.

Defense spending received an additional 32 billion shekels under the new budget, pushing the deficit target to approximately 5% of the nation’s gross domestic product.

Economic analysts warn this increased spending could trigger inflationary pressures, potentially delaying the return to sound fiscal management and limiting opportunities for future interest rate cuts.