As Israeli ground troops entered Lebanon on July 19, Dubai, United Arab Emirates-based Damac Properties, the biggest privately owned developer in the Persian Gulf region, said it was proceeding with plans to build a $150 million tower in Beirut. The 27-story luxury residence, which Ivana Trump is helping to design, will include a swimming pool, restaurants and views of the Mediterranean Sea.

The flow of money into Lebanon from oil-rich gulf states has boosted economic growth this year and may speed the nation's recovery from the war, says John Lomax, an emerging-market strategist at HSBC Securities in London.

Israel, which suffered much less destruction from the conflict, will likely rebound faster. Its robust exports and consumer spending will limit the damage from factory closings and displaced workers, says Serhan Cevik, a London-based economist at Morgan Stanley.

Lebanon's economy was thriving before the outbreak of hostilities between Israel and Hezbollah on July 12. The Finance Ministry had forecast that the economy would grow about 6 percent in 2006, compared with 1 percent in 2005. Real estate investors and tourists from Saudi Arabia and other gulf nations were streaming into Lebanon before the war, driving its growth. The government had predicted that direct foreign investment would jump 20 percent in 2006 after rising to $1.7 billion in 2005.

"There's a lot of money coming into Lebanon from the gulf because of high oil prices — everything from properties to factories," says Tareck Farah, head of financial markets at Financial Funds Advisors International SAL, a Beirut-based brokerage and fund management company. "I expect this to continue. They invest here because they vacation here and like it."

Officials were expecting a record 1.6 million vacationers this year, lured by Beirut's trendy restaurants and the nearby white sand beaches and mountains. The war sent tourists fleeing the country as Israeli bombs destroyed roads, bridges, airports, ports, power stations and as many as 15,000 homes, according to the U.N.

The bombardment of Lebanon's Jiyyeh power plant spilled 10,000 tons of fuel oil, polluting two-thirds of the nation's 220-kilometer Mediterranean coastline. The spill may rival the size and cost of the Exxon Valdez disaster in Alaska in 1989. The $2.5 billion in damages from the war will take two to three years to fully repair and will throw Lebanon into a recession, Public Works and Transport Minister Mohammed Safadi says.

Saudi Arabia and Kuwait have already softened the blow to Lebanon, giving it $2.3 billion in loans and grants in August. Hezbollah, a Shiite Muslim group backed by Iran, says it will rebuild all of the destroyed homes and give displaced people money for rent for a year. Hezbollah's leader, Hassan Nasrallah, said the group expected financial support to rebuild the country.

"Nasrallah often speaks of friends who help Hezbollah," says Amal Saad-Ghorayeb, a professor at Lebanese American University and author of the book "Hizbu'llah: Politics & Religion." "He means Iran."

The Israeli economy will probably lose a percentage point of growth this year because of the fighting, Bank of Israel Gov. Stanley Fischer said in an interview with Bloomberg News on Aug. 11.

Overseas investors should keep capital flowing into Israel, New York-based Standard & Poor's says. On July 30, Milpitas, Calif.-based SanDisk Corp., the world's largest maker of memory cards in consumer electronics, agreed to buy Israel's M-Systems Flash Disk Pioneers Ltd. for $1.7 billion.

"The effects of the war should be very limited on Israel," Cevik says. "Lebanon has benefited from petrodollars in the past, and that should provide some sort of cushion for the rebuilding going forward."