Executive summary

During periods of crisis and conflict, the geographic, historical, political, and cultural interconnectedness between Syria and Lebanon have had a significant influence on both countries. Given this, the recent escalation of hostilities between Israel and Hezbollah in Lebanon are likely to spill over into Syria, amid broader regional tensions in the wake of the conflict in Gaza. In this report, Crisis Analysis–Syria (CA–SYR) examines the potential repercussions of the intensifying conflict between Israel and Hezbollah on Syria, with a particular focus on the potential effects on socio-economic conditions, cross-border displacement, damage to civilian infrastructure, and and implications on dynamics across zones of control.

The analysis hinges on three scenarios on the possible trajectories of Israeli-Hezbollah military escalations in Lebanon built by CA–SYR's peer, the Lebanon Crisis Analytics Team (LCAT), and include: I) the preservation of the status quo; II) a substantial yet measured escalation between Israel and Hezbollah; and III) a full-scale conflict similar to the 2006 Lebanon War. In brief, this report finds that:

• Military escalations between Israel and Hezbollah are likely to cause significant inflation in Syria – mostly felt in government-held areas and in the northeast where the Syrian pound is predominant – by disrupting official and unofficial trade and reducing the flow of dollars and remittances, which could further depreciate the Syrian pound and worsen living conditions for Syrian households already struggling economically.

• Lebanon's displacement could approach one million people in the event of a full-scale conflict. Lebanon's higher living costs may force some families to flee to Syria, though not projected to approach levels seen during the 2006 War between Hezbollah and Israel. Lebanese displacement into Syria could cause competition with host communities over scarce resources, and be unwelcome due to the historical effects of the Syrian conflict on Lebanese–Syrian communal relations. The return of Syrian refugees and migrant workers in Lebanon could increase market inflation and raise human rights and protection issues.

• Israel may attack Syrian infrastructure to impede Iranian and Hezbollah logistics. Damage to airports, ports, and energy facilities would hinder the transportation of commodities and key services, hurting daily life and economic stability in Syria. Syria's complex environment, with many local and regional entities vying for power, makes it vulnerable to regional conflicts amplifying local ones. Increased hostilities and tensions within Syria's divided zones could disrupt fuel supplies and other essential resources within Syria, worsening conflicts and the humanitarian crisis.

• In general, response actors should prioritize their contingency planning by monitoring security trends and concentrating on market assessments, exchange rate dynamics, and supply chain resilience. Furthermore, response actors should employ this report as a framework to maintain their awareness of local dynamics in their respective operational areas, thereby ensuring their capacity to respond in an increasingly complex Syria.