Nationwide strikes erupt in Israel as hostage deaths kindle pressure for cease-fire deal

Protests have spilled into Israel's streets, as the Jewish state braces for a nationwide strike amid mounting pressure on the administration of Prime Minister Benjamin Netanyahu to broker a cease-fire deal with Hamas and return hostages from the Gaza Strip.

Arnon Bar-David — the head of Israel's biggest union Histadrut that represents hundreds of thousands of workers in areas including health care and banking — called for a general strike across Israel's economy on Monday, the organization said on social media, amid a swelling wave of national frustration over the perceived failure of Netanyahu's government to clinch a deal and bring captive loved ones back home.

"It is impossible to stand in front of the cries of our children who are being murdered in the tunnels in Gaza, this is unacceptable," Bar-David said, according to a Google translation.

Peter Lerner, director general of the international relations division at Histadrut, told CNBC's Dan Murphy that the industrial action began as of 6 a.m. local time in Israel on Monday affecting the private and public sector in regions spanning from Beersheba in the south up to Haifa in the north, and also impacting the port of Haifa and Israel's main international airport, Ben Gurion.

"Clearly, the impact of the war on the economy of Israel is devastating. We are worried for the jobs of the workers and obviously where the government is leading us," he said, adding that the discovery of the bodies of further hostages had triggered "serious concerns" about the ongoing negotiations to secure the freedom of the remaining captives.

"We have a very clear perspective that people need to come first. That is what we do in our union work, and that's what we expect from the government to do in bringing home the hostages," Lerner said.

Israel's Manufacturers' Association endorsed the movement, with President Ron Tomer saying, "Too long we have been waiting for the right deal - it's time to bring the kidnapped home. The government must ensure that it does everything, for the return of the kidnapped as soon as possible, also under the restrictions of a limited cease-fire. We call on all businesses in Israel to act so."

Several municipalities and councils have declared support for the demonstrations.

Israeli Finance Minister Bezalel Smotrich criticized the action and on Sunday asked the country's attorney general to urgently petition the court for a restraining order to cancel the "political strike" of Monday.

"I ordered the salary supervisor to pass on a clear directive, which has already been published: an employee who does not come to work tomorrow will not be paid," he said in a Google-translated social media post.

"The heads of the Histadrut will not be allowed to turn the country upside down and use the workers as weapons to advance their political opinion."

Yair Lapid, Israel's opposition leader, backed the demonstration, urging "Histadrut and the employers and the local authorities to shut down the economy. You can't go on like this," according to a Google-translated update on the X social media platform.

The call to strike action comes after the Israel Defense Forces on Sunday reported recovering the bodies of six hostages abducted by Hamas from a tunnel in the south of the besieged Gaza Strip, which is controlled by the Palestinian militant group. The IDF estimates that Hamas still holds another 101 captives taken during the faction's Oct. 7 terror attack, although it remains unclear how many of these hostages are still alive.

The development rekindled the simmering discontent among Israelis who have been calling for the release of hostages, even at the cost of ending the war, on the heels of stalled negotiation progress by Israel, Hamas and mediators Qatar, Egypt and the U.S.

Massive crowds rallied in key Israeli cities on Sunday, with over 300,000 people gathered to demonstrate in Tel Aviv, according to a Google-translated update from the Hostage Families Forum, which organized some of the protests.

"Whoever murdered our abductees — does not want a deal," Netanyahu said in a Google-translated social media post. His administration has previously declared a goal of only finalizing the Gaza offensive once it has successfully eradicated the military abilities of Hamas and secured the release of all hostages.

Adding to domestic divisions, the ongoing war has also left Israel increasingly isolated from an international community that urges a cease-fire amid concerns over the country's military response in the Gaza enclave and harm to Palestinian civilians.

It has further taken a heavy toll on the Israeli economy, whose public finances are strained by the simultaneous campaign in the Gaza enclave and less frequent military operations against neighboring Lebanon's militant group Hezbollah. Israel's GDP notched 1.2% annual growth in the second quarter, well below a 4.4% consensus, according to Reuters.

On Aug. 12, Fitch Ratings downgraded Israel's credit score from A+ to A, issuing a negative outlook and citing the impact of "heightened geopolitical risk and military operations on multiple fronts." The agency projects Israel's budget deficit will hit 7.8% of GDP in 2024 and forecasts debt will remain above 70% of GDP in the medium term.

"[The hostages'] situation is immediately impacting our economy, it is impacting the cost of living here, the credit that Israel is getting," Lerner said Monday, acknowledging that "it's not easy to declare a general strike in the midst of a war" but stressing that "from our perspective, it's gone on for too long. And that's why we are striking today."