Damascus’s deep economic reliance on Lebanon, shaped by years of conflict and international sanctions, has made regime-controlled areas particularly vulnerable to Lebanon’s economic and political instability. This fragility was starkly exposed during Lebanon’s 2019 financial crisis, which accelerated the decline of Syria’s already weakened economy.
Today, the situation has become even more precarious as Israel intensifies its military campaign against Hezbollah in Lebanon, raising serious concerns about the potential spillover effects on Syria’s struggling economy.
These fears are largely driven by Israel’s targeting of a key border crossing and the disruption of informal trade networks between the two nations. This has severely impeded the flow of goods, exacerbating existing shortages. additionally, the large-scale reverse migration of people from Lebanon into Syria has placed further strain on the country’s limited resources, driving up the cost of living and deepening the financial hardship for residents in regime-controlled areas.
Rising costs and fuel price hikes
The disruption of trade routes has created substantial challenges for Syria’s fragile supply chain. Since the outbreak of the Syrian conflict in 2011, the regime has relied heavily on Lebanon as a vital conduit to circumvent international sanctions. Lebanese ports, along with both official and unofficial land crossings, have enabled Syria to access essential imports, including raw materials, consumer goods, and fuel. However, Israel’s military operations in southern Lebanon, coupled with the targeting of the al-Massnaa border crossing, are now threatening these critical economic lifelines.
The fear of further disruptions to supply chains has sparked panic among Syrian business owners, leading to sharp price increases in anticipation of worsening conditions. One of the most immediate and visible effects has been a dramatic surge in fuel prices. In Damascus, gasoline prices have skyrocketed, with black market rates soaring from 12,000 Syrian pounds per litre to as high as 30,000 Syrian pounds in just a few days.
Officials from the Consumer Protection Association in regime-controlled areas have attributed this sharp rise in fuel prices directly to the disruption of smuggling routes from Lebanon, which have been severely impacted by Israel's military strikes. As fuel supplies dwindle, the likelihood of further price hikes increases, making it even more challenging for Syrians to meet their basic energy needs.
This surge in fuel prices has had a ripple effect on the cost of other essential goods. For instance, the cost of transporting key commodities such as fruits and vegetables has doubled in many areas, causing prices to rise by 15-25%. These price hikes are exacerbating the financial difficulties faced by ordinary Syrians, who are already struggling to cope with the impact of an economy in freefall.
Export stagnation and trade barriers
Israel’s targeting of border crossings, particularly the Masnaa crossing between Lebanon and Syria, has further disrupted vital trade links between the two countries. The flow of goods from Lebanon into Syria has significantly decreased, either because routes have been physically closed or out of fear of further attacks. This disruption has led to a steep rise in prices across Syria’s markets.
For example, imported cigarettes have seen price hikes of 20-30% within just a week, with certain brands vanishing from the market entirely. Other goods, such as charcoal and hookah tobacco, have also become more expensive, with prices rising by 20%. Alcoholic beverages, typically imported from Lebanon, are now in short supply, and the remaining stock has experienced a price increase of more than 15%.
This trade disruption is not limited to imports alone. The conflict has also interfered with the supply of raw materials crucial to Syria’s domestic manufacturing sector. Many of these materials are imported via Lebanon, and their scarcity has pushed up the prices of locally produced goods. Syrian manufacturers have reported a 10-15% increase in production costs over the past two weeks as they struggle to secure the necessary inputs for their operations. This has placed additional pressure on Syria’s industrial sector, which has already been crippled by sanctions, rising production costs, low purchasing power, and limited access to global markets.
The halt in trade with Lebanon has also severely impacted Syria’s export sector. Prior to the recent escalation, between 30 and 40 Syrian commercial trucks crossed into Lebanon daily, carrying goods such as clothing, cotton products, plastic items, and foodstuffs. However, since Israel began targeting border crossings and transportation routes, this movement has reportedly come to a standstill.
The loss of Lebanon as an export market is a significant blow to Syria, as it represents one of the few remaining sources of foreign currency. With this avenue cut off, Syria’s ability to sustain its economy has been further undermined, deepening the country’s isolation and economic decline.
Housing crisis
While still unfolding, the influx of refugees from Lebanon into Syria has already begun to disrupt the housing market. Over 350,000 people have reportedly crossed into Syria within a matter of two weeks, triggering a dramatic spike in rental prices. With a surge in demand for housing and a lack of regulatory oversight, landlords and real estate brokers have seized the opportunity to raise rents substantially.
In many regime-controlled areas, particularly in Damascus, rental prices have surged by 50-100% in recent days. In some neighbourhoods, landlords have even begun requesting payment in US dollars, reflecting the increasing demand for housing. Additionally, tenants seeking short-term leases—common among those who are uncertain about the duration of their stay in Syria—are being asked to pay up to six months' rent in advance, further exacerbating the challenges faced by those in search of affordable housing.
The rapid rise in rent is driven not only by increased demand but also by the disparity between rental prices in Syria and Lebanon. While rents in Syria are high relative to local purchasing power, they remain lower than in Lebanon. This gap has allowed landlords to demand prices well above market rates from incoming refugees while long-term Syrian tenants find themselves priced out of their homes.
Many landlords in areas with a high influx of refugees have reportedly informed long-term tenants that they must either accept higher rents or face eviction. The lack of affordable housing options has left many Syrians scrambling to find alternative accommodations at a time when the country’s economic difficulties have already eroded their purchasing power.
Lira stable...for now
Despite the ongoing conflict in Lebanon, the Syrian lira has maintained a stable exchange rate against the US dollar in regime-controlled areas. This stability is notable, given the Syrian regime’s historical reliance on Lebanon to access foreign currency, which has been crucial in stabilising the lira’s value. One possible reason for this resilience is the inflow of dollars from the reverse migration of people from Lebanon back into Syria, which has either directly boosted the economy or attracted financial assistance to the regime.
However, it remains uncertain whether this influx can compensate for the diminishing supply of dollars that previously flowed from Lebanon. Over time, this growing gap could push up the dollar’s value, triggering widespread increases in the cost of living in regime-held regions.
The long-term economic effects of Israel’s escalating conflict in Lebanon on Syria are still unclear, but early signs are troubling. If the Syrian regime fails to secure alternative, stable trade routes, shortages of essential goods are likely to intensify.
Coupled with uncertainty about the conflict’s duration, this will likely continue driving up prices and worsening living conditions in regime-controlled areas. With stagnant wages and rising costs of basic necessities, more Syrians are being plunged deeper into poverty, further exacerbating the country's already severe economic crisis.
