Potential political instability following Israel's next election cycle, as well as renewed conflicts with Hamas and/or Iran, risk slowing the country's economic growth and hampering business investment, though key sectors like tech and defense would likely be among the most resilient in any slowdown. In early January, the Bank of Israel released its economic projections for 2026, forecasting 5.2% GDP growth, nearly double the 2.8% growth rate from 2025. In addition, the Bank of Israel forecasted a low annual inflation rate of 1.7%, a slight decrease from 2.4% in 2025. However, the bank caveated both forecasts under the assumption that the Hamas-Israel ceasefire, which went into effect on Oct. 10, remains largely intact and that regional tensions remain low. These caveats are particularly relevant given recent developments.