Analysts at Capital Economics said an effective ceasefire would have an "overwhelmingly positive" impact on Israel's public finances.
The research firm's Liam Peach said defence spending there rose to almost 9% of GDP last year, which is three percentage points higher than its average during the 2010s.
A reduction in military spending, a rebound in the economy, tax revenues and fiscal tightening measures as part of a 2025 budget worth 1.8% of GDP should narrow Israel's budget deficit, which came in at 7% of GDP last year.
"We think the conditions are in place for a deficit closer to 4% of GDP this year and for the public debt ratio to move back onto a declining path from 2026," Peach said.