Much has been said about the devastating damage Hezbollah’s military capabilities have sustained in the current war. Yet at the strategic level, the severe blow dealt to its financial infrastructure is no less significant. Missiles, rockets, UAVs, tunnels, and even personnel are resources that can be replenished – as long as you have the money to do so. The damage to Hezbollah’s financial apparatus is turning the degradation of its military capabilities from a temporary low point into a lasting condition, or, at the very least, one from which it will find it extremely difficult to recover.
When the war broke out, the IDF and Mossad naturally focused on destroying Hezbollah’s kinetic capabilities, physical infrastructure, and chain of command in order to suppress the organisation’s firepower as rapidly as possible. Before long, however, a parallel effort was launched: to dismantle - or at least severely cripple – Hezbollah’s financial and economic apparatus.
The main challenge Israel faced stemmed from the decentralised nature of this system. Hezbollah does not have a single revenue source that can simply be cut off. Rather, it relies on an intricate network of revenue streams, couriers, money changers, drug traffickers, and other intermediaries. Above all of these, however, stands one principal source of funding that feeds the entire system: Iran.
Consequently, a substantial portion of the economic damage inflicted on Hezbollah did not result from direct attacks on the organisation’s financial system, but from the unprecedented blows Israel and the United States dealt to the Islamic Republic itself. Estimates put the cumulative damage suffered by Iran during the 12-Day War and Operation Roar of the Lion/Epic Fury at hundreds of billions of dollars, with some estimates reaching as high as $1 trillion.
In addition, according to an assessment by the Foundation for Defense of Democracies (FDD), Iran is losing approximately $435 million every day as a result of the Hormuz blockade alone, primarily because its ability to export oil has been curtailed. This comes on top of the damage caused by the unprecedented economic sanctions imposed on the Islamic Republic by the Trump administration. Given that Iran’s economy was already in fairly poor condition before the current war, it is evident that under the new circumstances Tehran’s ability to funnel money to Hezbollah has been significantly impaired.
According to an assessment by the U.S. Treasury Department, Hezbollah’s annual budget before the war stood at roughly $1 billion, approximately $700 million of which came from Iran, although it is extremely difficult to assign a precise and constant figure. What is clear is that the war, combined with other regional developments, has severely reduced the organisation’s flow of revenue.
The fall of the Assad regime in Syria and its replacement by the Sunni government of Ahmed al-Sharaa and Hayat Tahrir al-Sham (HTS) – bitter enemies of Shiite Hezbollah dating back to the Syrian civil war – largely shut down the overland smuggling route from Iran through Syria and into Lebanon that the organisation had long used. The route still exists – the Sharaa government is currently incapable of hermetically sealing a border stretching hundreds of kilometres – but the flow of weapons and cash through it has slowed dramatically.
The change of regime in Syria also dealt a severe blow to one of Hezbollah’s independent sources of income: the trade and distribution of Captagon. The synthetic drug is estimated to have generated billions of dollars annually for the Assad regime, with Hezbollah taking a share estimated at tens to hundreds of millions of dollars per year. Very broadly speaking, the division of labour worked as follows: the Fourth Division of Assad’s army was responsible for much of the drug’s production, while Hezbollah operatives played a major role in the logistical side of the supply chain: storage, transportation, and distribution. Hezbollah-linked networks remain active in the Captagon market today, but the scale of their activity has declined significantly.
Hezbollah’s involvement in the drug trade also has a global dimension. Networks linked to the organisation cooperate with South American drug cartels, particularly in Venezuela, Colombia, and the tri-border area of Brazil, Argentina, and Paraguay. Hezbollah is not itself a drug cartel, but it provides significant money-laundering and logistical services to the cartels, earning substantial profits in the process.
Yet portraying Hezbollah as an organisation that relies primarily on drug revenue would be misleading. The narco-economy is an important but complementary component of Hezbollah’s complex economic structure. The Shiite terrorist group also controls a range of legitimate businesses. In Lebanon, for example, it operates a network of dozens of gas stations under the Al-Amana name, generating lawful revenue while simultaneously supplying fuel to its vehicle fleet.
These stations, like Hezbollah’s other legitimate businesses, also serve as infrastructure for laundering money received from Iran and from the drug trade by mixing illicit funds with the legitimate revenues generated by such businesses. Before the war, Al-Amana operated more than 50 gas stations, but roughly one-third of them were attacked by the IDF. The financial damage these strikes inflicted on the organisation is difficult to quantify, but is estimated at millions of dollars annually.
In addition, Hezbollah owns or holds stakes in Lebanese companies operating in a variety of sectors, ranging from real estate and agriculture to pharmaceuticals, hospitality, communications, and more. This network, deliberately woven into Lebanon’s legitimate economy, not only facilitates money laundering but also makes targeting it more problematic for Israel because of its civilian character.
As noted, however, the lion’s share of Hezbollah’s funding and assistance comes from Iran. Unit 190 of the Islamic Revolutionary Guard Corps’ Quds Force is responsible for transporting money and weapons to Hezbollah, in cooperation with Hezbollah’s Unit 4400. A large share of these shipments arrived overland through Syria – a route that, as noted, was partially disrupted by the fall of the Assad regime. Many other shipments, including cash, arrived through Beirut International Airport, which before the war was to a considerable extent under Hezbollah’s influence.
Many of the cargo and courier flights were operated by the Iranian airline Mahan Air, which was effectively run by the Revolutionary Guards. Two of the airline’s wide-body aircraft – a Boeing 777 and an Airbus A340 –were destroyed during the war by the Israeli Air Force, alongside a large number of passenger and cargo aircraft belonging to other Iranian airlines. For Iran’s aviation industry, which had already been under severe sanctions for many years before the war and struggles to obtain spare parts and new aircraft, this constituted a very serious blow. Earlier this month, the US imposed sanctions on all Iranian airlines not already subject to restrictions and warned that foreign companies supporting them could face exclusion from the global financial system. In addition, Israeli and American control of Iranian airspace has severely disrupted the air transport of weapons and money to Hezbollah.
Faced with sanctions that largely cut Hezbollah off from the international financial and banking system, the organisation developed an alternative financial architecture. As noted, it relies partly on money laundering through ostensibly legitimate businesses, but also on extensive use of alternative stores and means of payment – primarily cash, gold, and cryptocurrencies – as well as a long chain of shell companies.
Hezbollah’s most important financial institution, however, is Al-Qard Al-Hasan (a phrase meaning “the benevolent loan,” while simultaneously containing a reference to the first name of the organisation’s former secretary-general, Hassan Nasrallah). It is not a bank in the conventional sense, not least because Islamic law prohibits the most basic activity associated with conventional banking: lending money in exchange for interest. Al-Qard began as an institution providing cash loans against deposits of gold, jewellery, or other collateral, charging a form of fee rather than interest in order to generate revenue while remaining compliant with Islamic law.
Over the years, the once-modest institution expanded to more than 30 branches, creating a system of deposits and payments that bypassed traditional banks. On the night of October 20-21, 2024, the Israeli Air Force launched a wave of strikes against Al-Qard branches, destroying more than 12 of them. The operation damaged Al-Qard but did not completely destroy its cash and gold reserves, most of which had been moved in advance to safer hiding places. Nevertheless, reports of difficulties in Al-Qard’s operations began to multiply following the strikes. After the war, partly as a result of the elimination of senior Hezbollah financial operatives, more concrete reports began to emerge of cash shortages affecting Al-Qard.
Against the backdrop of these setbacks, Hezbollah has also benefited in recent months from indirect Qatari financing. Doha allocated nearly $900 million for the reconstruction of villages destroyed during the war in southern Lebanon – ostensibly an entirely humanitarian undertaking. Hezbollah had pledged to residents that it would finance the reconstruction of their homes, just as it did following the Second Lebanon War in 2006. Yet given the damage described above to Iran and to Hezbollah’s own economic system, the organisation has been unable to fulfil that promise.
Qatar, fully aware that Hezbollah is designated as a terrorist organisation and is subject to US sanctions, has been careful not to transfer money directly to the group. Nevertheless, by financing the reconstruction of villages in southern Lebanon, Doha frees up what limited funds Hezbollah still possesses for rebuilding its military capabilities. No less importantly, the reconstruction assistance helps mitigate the intense criticism Hezbollah faces among the Lebanese population.
Even today, after the most devastating war in its history, it would be inaccurate to speak of Hezbollah as having economically collapsed. Yet the organisation that was once the world’s strongest and wealthiest terrorist army is today a pale shadow of its former self, struggling for its very survival. Without its Iranian patron and its Syrian rear base, and after nearly every component of its financial and economic system sustained severe damage, the Hezbollah of September 2026 is a very different organisation from the Hezbollah of October 2023.
Tamir Morag is the diplomatic correspondent for Israel’s TV channel and news site Channel 14
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