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3. From War To Business Suits: What Peace with Israel Could Mean for Lebanon's Economy

As Lebanese and Israeli officials met face to face in Washington for the first time in decades, the war with Hezbollah dominated headlines, but the prospect of future economic ties between Jerusalem and Beirut came into view.

Following the meeting, Israeli Ambassador to the U.S. Yechiel Leiter brought up the potential windfalls of peace. “The only reason we’ll need to cross each other’s territory will be in business suits to conduct business or in bathing suits to go on vacation,” he said in a press conference.

Lebanese Prime Minister Nawaf Salam said on December 3, 2025, that economic talks would be part of any potential normalization of ties between his country and Israel.While still hypothetical, such a shift could carry profound economic implications for Lebanon, which has been mired in a devastating crisis since 2019.

Peace Dividend

Former U.S. Treasury official Hagar Chemali said Lebanon’s economic recovery is unlikely without a peace agreement with Israel, pointing to the transformative potential of such a deal. “The economic argument is there,” she told This Is Beirut.

A peace agreement could unlock large-scale investment across key sectors, including energy, desalination, infrastructure, agriculture, and real estate, creating jobs and attracting foreign capital and returning diaspora wealth, she said.

Chemali draws parallels with the Abraham Accords, where economic incentives have helped sustain normalization agreements, noting that trade between Israel and the United Arab Emirates alone is projected to reach $10 billion annually.

For Lebanon, she argued, a similar dynamic could emerge, potentially reducing reliance on IMF loans by replacing debt dependency with investment-driven growth. “Why take on more debt,” she said, “if you can generate real revenue through investment and development?”

Economist Carlos Abadi echoes this optimism, emphasizing the speed at which markets could react. “Very quickly,” he says, describing how investor confidence, capital inflows and currency stabilization could follow a credible peace signal almost immediately.

Lebanon’s GDP, which stood at nearly $60 billion in 2018 before a sharp contraction following the 2019 economic crisis, could reach $100 billion within five years under a stable framework, he said.

Abadi distinguished between two phases of recovery. The first is a “confidence dividend,” largely self-executing once a credible political signal emerges. In this phase, diaspora remittances would accelerate, deposits would return to the banking system, tourism would rebound, and latent demand from Lebanon’s global diaspora—estimated at 14 to 18 million people—would be unlocked.

he second, more complex phase is a “structural dividend,” which would require deliberate policy choices and long-term investment. It would include offshore gas development, rebuilding electricity and transport infrastructure, and re-establishing Lebanon as a regional financial hub at the crossroads of Gulf capital, Israeli technology, and Western financial networks.

1955 Boycott Law

Unlocking economic normalization with Israel would require an overhaul of existing Lebanese laws, which render impossible any commercial activity. Former Justice Minister Ibrahim Najjar explained that the 1955 boycott law explicitly prohibits all contact with Israelis, including commercial, financial or contractual relations.

This prohibition remains fully in force today and constitutes a fundamental legal obstacle to any immediate economic engagement, he told This is Beirut. Najjar outlined how the law could be repealed, a clear but politically complicated process.

First, a peace agreement with Israel would need to be negotiated and ratified by the Lebanese government, then approved by Parliament. Only after the exchange of ratification instruments between Lebanon and Israel and its publication in Lebanon’s official gazette would the agreement enter into force.

At that point, international treaties take precedence over domestic legislation in Lebanon, effectively nullifying the boycott law. While it is legally possible to repeal or amend the 1955 law before a peace agreement, Najjar said this would require Parliament to pass a new law.

Such a move, however, remains unlikely without a broader political consensus. “Only a law can cancel a law,” he notes, highlighting that the real obstacle is not legal feasibility but political willingness within Lebanon’s deeply divided institutions.

From Opportunity to Reality

Even if peace were achieved and legal barriers lifted, the opportunity might not immediately translate into sustainable growth, Abadi warned. Lebanon’s banking system remains so impaired that it may be unable to channel investment flows even if confidence returns rapidly, he said.

Without restoring the financial system and strengthening the rule of law, the initial peace dividend could dissipate. This would risk repeating past cycles such as Lebanon’s postwar reconstruction of the 1990s, when capital inflows fueled consumption rather than durable institutional reforms, he said.

Chemali, however, remains optimistic about the speed of a potential peace dividend. Beyond investment and trade, she pointed to sectors such as tourism and real estate, where demand could surge almost immediately.

The return of diaspora investors, rising property values, and increased regional travel could reshape Lebanon’s economic landscape. More broadly, she said peace could integrate Lebanon into emerging regional economic systems, linking Gulf capital, Western businesses, and infrastructure projects.

Ultimately, the prospect of a peace-driven economic revival is both real and fragile. The Washington talks may mark a historic diplomatic opening, but the true test lies in whether Lebanon can align its legal framework, political system, and economic institutions to capture the benefits of peace.