In Israel, resilience fades to resignation as Gaza conflict worsens E-mail Tweet Facebook Google Plus Linkedin Share icons by Scott Olster, editor @FortuneMagazine July 23, 2014, 9:29 AM EDT Roni Kozoshvili steps out of the House of Sheesha café in Tel-Aviv-Jaffa, his long arms draped around the neck of his best friend, Abdullah Mahamid. Mahamid’s mother, covered in a black abaya and a modest headscarf, has come for a visit. She breaks into a big smile when she sees her son. Normally, the café’s parking lot is filled. It is almost 7 p.m. on a Friday evening, the beginning of the Jewish Sabbath, and a time when most Israelis pause for an hour or two of conversation and coffee. Arabs often start their week’s rest a bit early to sit, gossip, and sip small cups of tea. But the House of Sheesha, the neighborhood’s magnet for regulars and commuters alike, is empty. “Come,” says Mahamid, who owns the café, beckoning me inside to see the place filled with tables and an impressive array of hookahs neatly placed on shelves, along the floor, and on top of his bar. What’s missing: people. “No one wants to go out these days,” he says, lamenting that business has dropped 80% since Hamas began to fire missiles over the city, as part of a conflict that has already claimed hundreds of lives. Mahamid rushes over to his computer to show me a YouTube pan of the House of Sheeba in better days: not one empty chair, the beat of Arab music, and smoke-filled air. Kozoshvili proudly points to pipes that are labeled with the names of special customers, and those that are available to all-comers. “Look,” he says stooping to display a large pipe bearing his name and, still warm from use, “this one’s mine.” An Israeli Jew whose family came from former Soviet Georgia, Kozoshvili has plenty of time for cafes these days. He drives a taxicab from Tel Aviv’s Ben Gurion Airport. “Business is dead,” during what is normally Israel’s peak season, he says, shaking his head. “No one’s coming.” Indeed, Israel’s tourism industry is bracing for a $100 million loss during its prime travel months of July, August, and September. Only a fraction of the 800,000 visitors that hotels banked on for the third quarter are expected to show up, and managers have been slashing staff to mitigate their losses. I was the only guest in my hotel earlier this week; today the place is at 20% occupancy, and down to a skeletal staff. Tens of thousands of military reservists have been called into service, in addition to the Israelis currently conscripted. War costs are spiraling toward $1 billion. Citizens here are as grateful as they are proud of the Israeli-devised air defense system, Iron Dome, which is deployed when populations or strategic locations are at risk. Given that each interception costs between $50,000 and $60,000, the Israeli Defense Forces have not activated it for missiles aimed at deserted areas or the open sea. The government stresses that the billion-dollar research and development of the system is money well spent: each interception saves the country lives as well as prohibitively expensive reconstruction costs on the ground. Hamas continues to lob rockets into cities, along the seashore, rural areas, and the desert, sending people fleeing for cover, while Israel Defense Forces strike Hamas targets in Gaza, causing collateral damage to the civilian population. The escalation of violence has heightened tensions inside Israel. Areas where generations of Arabs and Jews have lived, worked, and socialized together are now under tremendous strain. Wrapped in Israeli flags, right-wing protestors, including West Bank settlers, Orthodox Jews, and Israeli rap artist Yoav Eliassi “The Shadow” are among those demonstrating in Jaffa, chanting “Death to all Arabs,” and more vulgar slogans. Incredulous onlookers heave disgust at what they see; some Jewish Israelis shopping at a local convenience store offer the young Arab woman behind the counter protection, should the crowd become explosive. Arabs in the usually quiet town of Nazareth fill the streets to protest the IDF invasion of Gaza. Israel’s Prime Minister Benjamin Netanyahu contends that the IDF will not pull out until the rockets stop. With some 10,000 more Hamas rockets hidden in tunnels, there is no end in sight. And in the interim, Israeli Foreign Minister Avigdor Lieberman has added fuel to the fire, calling on Israeli Jews to boycott Arab businesses whose owners and workers protest Israel’s incursions in Gaza. “The Arabs in Israel are in a very awkward situation,” says Nazareth-based Yara Mashour, editor of Lilac, a leading Arab magazine. “On the one hand, they are part of the Palestinian people and many of them have families in Gaza and also the West Bank. And on the other hand, they are part of this country and they want to be fully integrated in the state and are always seeking equality and full rights.” But, she says, “in times of war, the Arabs in Israel are turned into enemies,” and their freedom of speech is curtailed. Israel is incurring untold expenses by stationing additional police and other security personnel to try to curb violence at the demonstrations. The uniformed officers are seen by some as part of the problem, not the solution. Putting his arm around Mahamid again, Kozoshvili says: “All we want is a good life for our family. And a better life for our children.” Mahamid looks at his friend and nods. An hour after Israel’s Iron Dome Defense system intercepts rockets with four big explosions above south Tel Aviv, proprietor Ali Jaffaly is behind the counter at Kessem Hatsava hardware, dealing with shoppers in an effortless move between his native tongues of Hebrew and Arabic. “Business is not so good. People are staying inside. They are not going out because of the war.” With Jewish shops shuttered for the Sabbath, this is where Uri Sivan is looking for putty to fill holes in his wall and special screws to hang heavy artwork for an upcoming exhibition. “The weekend is when Jews shop,” says Jaffaly, whose customers are half Israeli Jews, and half Israeli Arabs. Arabs shop on Sunday and Monday, he adds. As he counts the screws for Sivan and measures some wire, Jaffaly has some advice for the political leadership driving the conflict. “They can talk to stop the war. They have to talk, not kill. The Israelis should stop the bombs, and the Arabs in Gaza should stop the rockets,” he says. His 15-year-old son Kamal Elabeed looks on and adds, “I think it will end. Maybe today, maybe tomorrow. But it will end.” Ali Jaffaly of Kessem Hardware (right) with his son Kamal Elabeed (center).Photo by Amy Kaslow Others are less sanguine. One merchant after another in the Carmel Market says he is expecting more trouble for the vibrant multi-block spread of stalls selling fresh vegetables, fruit, candies, cheese, and fish. The winding path is relatively clear and quiet, with hawkers chatting, smoking, and some even sleeping in their chairs. Neighbors wince when they recall the Popular Front for the Liberation of Palestine suicide bomber who rocked the market in 2004, claiming three lives and causing dozens of serious injuries. At Sheri’s shoe store on Allenby Street, just outside of Carmel Market, Yoram Shamriz sits next to the cash register, idle. “How’s business? Not good. It’s down by more than half,” he says. “But business is not the problem. The situation is the problem. We are surrounded on all sides by people who don’t want us here,” he says, referring to Israel’s Arab neighbors. “They want to do something about it and they won’t stop.” After the missiles began to descend, Israelis who scurried into stairwells and down to bomb shelters waited for the sirens to die down and the powerful booms to stop. “Thank you, Iron Dome,” was a constant refrain. During the past week of mounting violence, the public seems to have moved from resilient to resigned. A pall of sadness and frustration hangs over the city. Stop a Tel Aviv resident on the street, and you are likely to get an earful about relatives at risk in Gaza, the tragedy of IDF soldiers killed, and of Gazans hijacked by Hamas extremists and wedged in by war. This will be a long summer in this city by the sea.