Money and Mind: Financial Strain Fuels Wartime Mental Health Decline

When war erupts, the world’s attention naturally turns to the immediate human toll: the casualties, the displaced families, the shattered communities. Yet a new yearlong study from Israel suggests that some of the most enduring damage unfolds more quietly, in the slow-motion collision between economic hardship and psychological distress. Researchers at the Hebrew University of Jerusalem have documented how, in the twelve months following the October 7 attack, money problems and mental health problems did not merely coexist among ordinary citizens — they actively fed each other, creating a self-reinforcing cycle that could shape recovery for years to come.

The study, led by doctoral researcher Dana Katsoty and published in the peer-reviewed journal Social Psychiatry and Psychiatric Epidemiology, is among the first to track the bidirectional relationship between economic and psychological outcomes during an ongoing armed conflict. Beginning just two weeks after the October 7 attack, the research team followed 1,035 Jewish Israeli adults across four survey waves spanning a full year. At each point, participants reported symptoms of depression, anxiety and post-traumatic stress, alongside a detailed accounting of financial difficulties: job loss, unpaid leave, reduced income, increased expenses and business losses. This longitudinal design allowed the investigators to examine not just whether the two domains were correlated, but which tended to precede the other over time.

The answer, it turned out, was both — in a striking temporal sequence. In the earliest phase of the war, psychological state predicted economic outcomes. People reporting higher levels of depression and anxiety in the first weeks after the attack were more likely to experience economic hardship in the months that followed, a pattern consistent with a substantial body of occupational research showing that mental distress impairs concentration, decision-making, absenteeism and job performance. Then, as the war wore on, the causal arrow reversed. Financial difficulties emerged as predictors of subsequent increases in depression, anxiety and PTSD symptoms, suggesting that mounting economic pressure became a distinct psychological stressor in its own right, compounding the trauma of the conflict itself.

The sheer scale of psychological distress at the study’s outset underscores how extraordinary the starting conditions were. Two weeks after the attack, 55.8 percent of participants scored above the clinical cutoff for depression, and 61.1 percent exceeded the threshold for anxiety. For context, population-level prevalence of clinically significant depression in high-income countries typically hovers in the single digits to low teens. Those elevated rates declined substantially over the following six months, offering evidence of natural psychological resilience at the population level. But the improvement did not hold. By the one-year mark, symptoms began climbing again, and PTSD symptoms — measured later in the study because acute stress reactions are typically not assessed as post-traumatic disorder in the immediate aftermath of a traumatic event — rose from 16.9 percent at six months to 21.4 percent after a full year.

Economic disruption proved equally pervasive. At every assessment point, a large share of participants reported at least one or two negative financial events, whether reduced income, job disruption, business losses or rising household expenses. The Israeli economy was profoundly disrupted by the war, with hundreds of thousands of workers displaced from their jobs, businesses in the north and south of the country shuttered, and reservists called up for extended military service. By the one-year mark, more than half of the study participants remained in the moderate economic-hardship category, indicating that for a majority of ordinary citizens, the financial consequences of the conflict were not a brief shock but a persistent condition.

Methodologically, the study’s strength lies in its dose-response analysis. The researchers found a clear gradient: the more negative economic events a participant experienced, the more severe their symptoms of depression, anxiety and PTSD tended to be. Crucially, this association held even after the team statistically controlled for age, gender, prewar income and level of exposure to wartime events. That adjustment matters, because a skeptic might argue that people closer to the fighting would naturally suffer both financially and psychologically. The persistence of the economic-hardship effect after controlling for exposure suggests that financial strain operates as an independent pathway to psychological harm, not merely as a proxy for danger.

Perhaps the most provocative finding was comparative. Economic hardship showed a stronger and more consistent association with mental health outcomes than the researchers’ overall measure of direct war exposure. The authors are careful to caveat this: different forms of exposure — displacement, rocket attacks, the death or injury of a loved one, personal combat experience — are notoriously difficult to compress into a single quantitative index, and any such measure risks underestimating the most severe experiences. Still, the pattern points to a plausible mechanism. Financial strain is uniquely persistent and invasive, seeping into daily routines and eroding a person’s sense of security, control and ability to plan for the future. Where a discrete traumatic event has a temporal boundary, the threat of insolvency does not.

The theoretical implications extend beyond this single conflict. Decades of research on socioeconomic gradients in health have established that poverty is a risk factor for mental illness, and disaster research has shown that economic losses predict post-disaster distress. What this study adds is temporal resolution during a prolonged, ongoing crisis: evidence that the relationship is genuinely bidirectional, with psychological vulnerability preceding economic decline and economic decline preceding psychological deterioration. This suggests that prolonged conflict can trap affected populations in what the researchers describe as a reinforcing loop, in which each domain continuously re-arms the other. The authors warn that without intervention, people affected by prolonged conflict may face a double burden, in which financial strain intensifies the psychological consequences of war and psychological distress makes economic recovery more difficult.

For policymakers, the practical message is that mental-health treatment and economic support cannot be scheduled sequentially. The researchers argue that emergency and rehabilitation programs should integrate psychological care with direct economic assistance, and that this integration is particularly urgent for people facing loss of income, employment instability or rising expenses. Cash transfers, employment protection, subsidized childcare and business support are not merely economic instruments; by this evidence, they are mental-health interventions. Conversely, psychological services may function as economic protection, helping people maintain the cognitive and emotional resources needed to keep working, budgeting and rebuilding. Katsoty summarized the core conclusion plainly: the psychological and economic consequences of prolonged conflict cannot be treated as separate problems, and supporting recovery may require addressing both at the same time.

As wars in Ukraine, the Middle East, Sudan and elsewhere grind on, the findings offer a sobering template for what recovery will actually require. Symptom rates in this cohort declined and then rebounded, a trajectory suggesting that one-year horizons may dramatically underestimate the long-term psychological cost of prolonged conflict, particularly as economic reserves deplete. The study followed participants for a single year; whether the reinforcing cycle documented here continues to tighten, stabilize or loosen in the years ahead remains an open empirical question. But the direction of the evidence is clear. If societies hope to rebuild after prolonged violence, they will need to treat the wallet and the mind not as separate recovery projects, but as two fronts of the same campaign.

Subject of Research: Bidirectional relationship between economic hardship and mental health during the Israel-Hamas war

Article Title: When war hits the wallet, mental health can suffer too

Article References: When war hits the wallet, mental health can suffer too. (n.d.). Original publication

Image Credits: AI Generated

DOI: Not provided

Keywords: mental health, economic hardship, war, PTSD, depression, anxiety, longitudinal study, Israel, October 7, financial strain, Social Psychiatry and Psychiatric Epidemiology, Hebrew University of Jerusalem