It was only a few weeks ago that the Ministry of Finance in Jerusalem was celebrating the highest annual growth in the country for years – over 8% in 2021. Today, after nearly two weeks of the fighting around Ukraine’s nuclear plants and other sensitive areas, 2022 does not seem so radiant.

Or does it? What actually might be the fall out from this human tragedy?

Early commentators have focused on Israel’s heavy reliance on wheat from the Ukraine and oil from Russia. Last week, I pointed out how tens of thousands of Ukrainians are employed directly by the Israeli high-tech sector, and no small number of many others are indirectly reliant on that success continuing. Assumedly, each of the three factors will not have positive consequences for the economy of the Holy Land.

Arguably, the most important impact on Israel’s economy could be felt in the microchip industry. For Israel, with 15% of the workforce employed in hightech, 3 large Intel plants and nearly 300 overseas incubators, this could be a big red light!.

According to research firm Techcet, Ukraine supplies more than 90% of the U.S.’s semiconductor-grade neon, a gas integral to the lasers used in the chip-making process, while Russia supplies 35% of the U.S.’s palladium supply, a rare metal that can be used to create semiconductors

VentureBeat

The Financial Times newspaper noted that there are global stockpiles for up to about two months, but then what?

BMO Capital Markets analysts say the motor industry could again be hit hard, both from chip shortages and a lack of wire harnesses. The latter bundle up the miles of cable in every car and Reuters reports production at Volkswagen, BMW and Porsche is being affected. Twenty-two car companies have invested more than $600mn in 38 plants in Ukraine — many, though not all, producing wire harnesses — and they employ over 60,000 people. Right now, being in a war zone, they are the motor industry supply chain’s weakest link.

Financial Times

One surprising piece of news is that the oligarchs may try to use Israel as a place to secure some of their families and / or even their wealth. The picture is less clear on this point, and the banking system led by London and New York will be looking to close off such loopholes.

And all this leaves us with one little beam of hope.

Ukraine is home to around 200,000 Jews. At the beginning of this week, it was announced that over 2,000 had already arrived in Israel, with more on the way. Historically, most waves of immigration place a strain on local resources, but only initially. Afterwards, the GDP figures receive a kick upwards.

Fasten those belts. More twists and turns are surely on the way.