Since the breakout of war on February 28, the US-Israeli conflict with Iran has been framed as an existential for Tel Aviv and Tehran. Yet a calm, structural reading of the past five months of fighting and faltering truces reveals a striking paradox: the party that incited this war has become the one least exposed to its fire and the one collecting most of its returns.

While Iranian missiles and drones fall on critical Gulf infrastructure, while Asian and Arab consumers absorb the bill for the closure of the Strait of Hormuz, and while American troops die in Iranian strikes, the Tel Aviv stock exchange keeps setting records, the shekel keeps rising, and Israel’s defence industries post unprecedented earning numbers.

Israel is bearing the least cost of a war that is eroding its adversary’s defences and devastating its neighbourhood.

The dismantling of Iran’s forward defence

A security doctrine Iran built for four decades is now unravelling. It was premised on moving confrontation away from Iranian territory through a network of proxies and allies, from Hezbollah in Lebanon to the Houthis in Yemen and various armed factions in Iraq.

That network was the core of Iranian deterrence and the lever of its expansionist policy. The current war has dealt this doctrine the harshest blow in its history.

Hezbollah entered 2026 already exhausted by its 2024 war with Israel and by the loss of strategic depth in Syria. In March, it committed a fatal error by intervening on Tehran’s behalf and drawing a devastating Israeli response. Then the United States put pressure on the Lebanese government to act against Hezbollah, leading to a prohibition on the group’s military activities and talk of disarmament.

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The pro-Iranian Iraqi factions also intervened on behalf of their benefactor, but suffered losses in US strikes. The US managed to block the return of the pro-Iran Nouri al-Maliki to the prime minister’s post in Iraq and install a relatively unknown banker, Ali al-Zaidi. His government now is under severe pressure to move against pro-Iran factions and disarm them by the end of September or suffer punitive economic measures from the US.

The Houthis, having learned from Hezbollah’s fate and the cost of their previous rounds of confrontation with Washington, were reluctant to join the fray. They have now been compelled to act, but not against the US or Israel directly; they are targeting Saudi interests, thus facing off with one of the largest armies in the world, as well as Yemeni forces loyal to the internationally recognised government.

The net result is that Iran increasingly bears the burden of the war alone. Israel’s first and perhaps most important strategic gain lies here: the war is accelerating the erosion of the network Iran spent more than four decades building, and with it the strategic logic of surrounding Israel with multiple fronts.

A war without a home front

At the beginning of the war, Israel did absorb direct Iranian missile barrages, but many of them were taken down by the Iron Dome and the additional air defence systems deployed by the US. By contrast, the Gulf states faced much more intense Iranian attacks that went beyond military targets and struck energy and civilian infrastructure.

In the current escalation, Iranian strikes have concentrated on civilian infrastructure across the Gulf states and Jordan, while deliberately avoiding both Israel and the American naval assets off the Iranian coast.

Tehran understands that striking US aircraft carriers would open the gates of hell upon it, and that hitting the Israeli interior again would widen the war at the very moment it is trying to preserve some space for talks with Washington. It has opted instead to pressure Washington through its Gulf neighbours.

The consequence is that Israel’s home front has effectively exited the target set. The cost of deterrence that Israel, as an instigator of this war, should be paying has been transferred to Gulf civilians who have no hand in it, some in states furthest removed from any normalisation with Israel.

As US air strikes continue to degrade Iranian missile capabilities, military infrastructure and senior command, Israel enjoys the strategic advantages of this sustained pressure without absorbing equivalent retaliation on its own territory.

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Rising war profits

While Israel is successfully transferring the military costs of war to the US and the Gulf, its economy is doing well. The Bank of Israel, even after cutting its forecast because of the war, still expects the economy to grow by 4 percent in 2026, ahead of most developed economies even in peacetime. The projected growth for 2027 is 5.5 percent.

The markets are more eloquent still. The shekel has appreciated by roughly 20 percent against the US dollar over the past year; the Tel Aviv-35 Index keeps setting records; and in March, at the height of the war, Google completed its $32bn acquisition of Israeli cloud cybersecurity startup Wiz.

Global capital, in other words, is pricing this war as an opportunity to reshape the region in Israel’s favour, not as a risk to it.

Then there is the direct war economy. In June, the Israeli Ministry of Defence announced that defence exports reached $19.2bn in 2025, up nearly 30 percent for a fifth consecutive record year, led by the missile and air defence systems whose chief marketing asset is precisely their battlefield performance. Every new engagement is, from the vantage point of Israel’s defence industries, a live demonstration before prospective clients.

In the energy sector, Israeli gas output from the Leviathan and Tamar fields is on track to exceed three billion cubic feet (85 million cubic metres) per day this year, with the surplus piped for export to Egypt, where it is liquified and sold on a global market with skyrocketing prices.

Israel’s shipping industry remains relatively untouched by the war, with its Mediterranean ports operating at capacity. Meanwhile, the blockade Iran imposes on the strait punishes the Gulf and their Asian partners.

The war cost paradox

None of this suggests that Israel is fighting a cost-free war. Defence spending has surged, economic output has fallen below its pre-war trajectory, and prolonged mobilisation imposes significant social and fiscal burdens.

But strategy is measured not by the absence of costs, but by the relationship between costs and gains, and by that measure Israel’s position appears far stronger than that of its principal adversary.

This is the central paradox of the current war. Israel’s greatest gains have not come from battlefield victories, but from the transformation of the regional strategic environment: accelerated pressure on Iran’s proxy architecture, dispersed Iranian military attention across multiple theatres, and a significant share of the war’s immediate costs shifted onto other regional actors. The distribution of those costs has become profoundly uneven.

Whether that asymmetry proves temporary or becomes the foundation of a new regional order remains to be seen. Preserving it will likely be the main goal of Israeli Prime Minister Benjamin Netanyahu as he visits Washington this week.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.