Israel’s military offensive in Gaza will lead to a larger-than-expected budget deficit next year, investment bank JPMorgan has said, adding that the cost of the conflict would also result in a significant jump in debt issuance, Reuters reports.

The bank’s analysts have said they now expect the government’s budget deficit to widen to around 4.5 per cent of gross domestic product (GDP) in 2023 and 2024 versus their previous forecasts of a 4.5pc deficit in 2023 but a lower 2.9pc deficit in 2024.

They have added that while the pressures would impact investor appetite for Israel’s bonds, they do not expect demand to evaporate. The bar for the country’s central bank to intervene in the bond market is also high, they have said.

“By now it is already clear that the war’s impact on the economy and government finances has been substantial,” a report by a group of JPMorgan analysts said.