GAZA CITY—Tensions between Israel and Palestinian militants have twice erupted into violence in recent months, but Hamas, usually a central player in the long-running conflict, has sat out on both occasions.

Israeli officials and analysts in Gaza say the militant group, which seized control of Gaza in 2007 and now runs its government, is hamstrung by an Israeli policy that bypasses Hamas and provides direct economic benefits to residents of the Palestinian enclave.

Israel has loosened its own restrictions on imports to Gaza and helped facilitate exports, as well as bolstering supplies of water, medicine and fuel. Most significantly, new work permits have allowed thousands of Gazans to find jobs in Israel for the first time since Hamas took charge in Gaza, paying off debts and supporting their families, which can often number more than a dozen people.

The new approach, led by the country’s Defense Minister Benny Gantz and initiated following a deadly battle with Hamas last year, has raised the cost of direct conflict for the militant group.

Damage in Gaza City after a three-day battle this month between Israel and Islamic Jihad.

Photo: MAHMUD HAMS/Agence France-Presse/Getty Images

Hamas is facing calls for protests demanding it improve the quality of life in the Gaza Strip, where rolling blackouts, high unemployment and escalating global food prices have further crippled an economy already hobbled by a 15-year blockade imposed by Israel and Egypt.

By unbolting some of the strictures it imposes on the Strip and threatening to reimpose them should Hamas attack, Israel has forced the militant group to choose between violent confrontation with its neighbor and preserving those economic incentives for its populace.

The dilemma is starting to alter Hamas’s operation in the Gaza Strip and its approach to Israel, but also potentially allowing time for the group to rearm, analysts say.

Hamas’s arsenal and weapons-production facilities came under intense Israeli fire last year after the group launched thousands of rockets at Israel.

Rockets fired by Palestinian militants flew toward Israel earlier this month.

Photo: Fatima Shbair/Associated Press

Israeli airstrikes hit the Gaza Strip earlier this month.

Photo: Fatima Shbair/Associated Press

And, away from Gaza, Hamas has sought to stoke tensions in Jerusalem and the West Bank by using its robust media arm to call on Palestinians to carry out attacks against Israelis.

Still, earlier this month, Hamas sat on its hands during a three-day battle between Israel and Islamic Jihad. Before that, the group refrained from attacking Israel during clashes between Israelis and Palestinians in Jerusalem—circumstances that mirrored events in May 2021 before it moved to fire rockets at Jerusalem.

The stretch between that 11-day battle and the recent clash with Islamic Jihad amounted to the longest period of relative calm on the Israel-Gaza border since Hamas took over the enclave.

“That is a testament to the success of this policy shift of this government over the last year,” said a senior Israeli official. This time “[Hamas] stayed out of it and took a step back. It seems they weren’t interested in the escalation in the first place,” the official added.

Israeli soldiers checked damage from a rocket fired from the Gaza Strip earlier this month.

Photo: atef safadi/epa/Shutterstock

To be sure, Israel still regards Hamas as a threat.

The Israeli official added that Hamas remained committed to armed conflict with Israel and said the policy hadn’t transformed the group into a partner for political dialogue.

“Hamas is still a terrorist organization dedicated to Israel’s destruction. Hamas is not a partner. It’s an enemy,” the official said.

A senior Hamas official said the group’s decision not to engage militarily in the recent conflict was taken on tactical and humanitarian grounds.

“We have specific considerations: balancing resistance to the occupation with our obligation to provide a dignified life for citizens in Gaza,” Ghazi Hamad said.

But, he added, the Israeli approach of providing some economic benefits without ending the blockade of Gaza was unacceptable.

Israel and Egypt imposed a tight blockade of the Gaza Strip after Hamas took control 15 years ago. The Israelis say the restrictions on people and goods prevent an even greater threat from the militants, while human-rights groups say they have impoverished ordinary Gazans.

More than half of Gaza’s 2.1 million residents live in poverty, many in crowded refugee camps, and the shaky electrical grid provides an average of 12 hours of power a day. Restrictions on material Israel fears Hamas will use against it mean construction proceeds slowly and hospitals struggle for equipment.

In the short term, Israel’s economic approach to Gaza has worked, said Fayez Abu Shemala, a columnist seen as close to Hamas. “As the number of workers increases, and quality of life increases, the impulse to fight decreases,” Mr. Abu Shemala said.

Palestinian workers waited to leave the Gaza Strip to work in Israel in May.

Photo: Fatima Shbair for The Wall Street Journal

Israel has offered some 15,500 permits giving Gazans permission to cross the border into Israel to work.

Photo: Fatima Shbair for The Wall Street Journal

Chief among the concessions offered by Israel are some 15,500 work permits allowing Gazans to cross the border into Israel for work, and Israeli officials promise another 5,000 will be able to do so in the near future.

In the first quarter of 2021, around 47.9% of Gazans over age 15 were unemployed. Since the policy shift, that figure has shrunk to 44.1%, according to the Palestinian Central Bureau of Statistics.

Israeli work permits boosted Gazans’ monthly income to about four times the average wage in the enclave, according to a recent study by Haggay Etkes of the Israeli Institute for National Security Studies and Wifag Adnan of NYU Abu Dhabi.

At the end of last year, Israel brokered a deal with Qatar that saw the rich Gulf nation provide Hamas with fuel rather than cash, increasing the electricity supply in the Strip while preventing Hamas from diverting the money to fund its armed wing. Israel, also late last year, secured an agreement for the United Nations to deliver Qatari stipends to needy Gazan families, rather than letting Hamas distribute the cash.

Palestinians received food aid from a United Nations agency in the Gaza Strip in June.

Photo: said khatib/Agence France-Presse/Getty Images

Israel’s policy toward services and civilians in the enclave complements the country’s military strategy, a senior Israeli security official said. “We don’t intend to compromise on the military threat. But we will advance as much as possible on the civilian front,” the official said.

Gazan exports to Israel have increased by 93% since the new policy loosened restrictions on border crossings, the official said.

In Gaza, some residents said they were glad Hamas stayed out of the recent conflict because doing so saved lives and preserved the economic initiatives from Israel. But they still hold Israel responsible for the poverty and misery inside Gaza, they said, and handouts wouldn’t change that.

“[Israeli benefits] will ease us somewhat in terms of living conditions and job opportunities,” said Rashad Abdullah, 24, who works as a laboratory equipment engineer in Gaza City. “But in the end, our compass will remain, which is to defeat this cowardly enemy from our land.”

Israeli security analysts say the shortcoming of the economic policy toward Gaza is that it buys Hamas time to rearm.

The group can rebuild its rocket arsenal and increase the size of its armed wing before picking its time to renew hostilities with Israel, they say.

“The weaknesses of this [policy] path comes from the fact that the peace it offers will always be temporary and fragile,” said Meir Ben-Shabbat, Israel’s recently retired national security adviser.

“The challenge will be to prolong [this peace], and when there is a conflict—to fully take advantage of it in order to restore deterrence and weaken Hamas,” he said.

A Palestinian worker cleared rubble after recent fighting in the Gaza Strip.

Photo: Mahmoud Issa/Zuma Press