Briefing foreign journalists at the site of an August 5 attack, where still-unidentified attackers burst through a border crossing into Israel after killing 16 Egyptian guards in the adjacent Sinai, he said that "thousands" of militants were holed up in the remote region where local Bedouin help them.

"There are nests of terrorists there, big nests," he said in Hebrew, speaking on condition of anonymity.

"Since the revolution in Egypt, since the fall of (President Hosni) Mubarak, there has been a significant deterioration," he said.

"Sinai has turned into an area which is out of control," he said. "The Bedouins who control the area... they make money from smuggling and helping terrorists."

Global jihad groups, he added, are looking for areas where there is a vacuum of central authority.

"Like in Afghanistan and elsewhere, they look for the absence of government, that way they can survive," he said. "If the Egyptians don't take things in hand now, that's what they'll get, them and us."

The Egyptian military has massed troops in the Sinai and pledged to restore order to the remote, and often inaccessible area, since the cross-border raid in which the attackers used an Egyptian armoured vehicle to take them across the frontier before they were halted by Israeli helicopter and tank fire.

The Israeli source said that the Bedouin did not share the religious and political commitment of the militants to whom they sell their support.

"They don't have the ideology to blow themselves up," he said. "They don't care if they kill Egyptians or Jews, what they care about is how much money goes into their Swiss bank account."

"The terrorists pay a lot of money, they don't know the territory, they don't know how to reach a certain spot without guides."

"The same people who are smuggling drugs are the same guides who get the terrorists through, but instead of getting 100,000 dollars (for an assignment) they get half a million dollars."

Talk of an imminent strike has dominated the press in recent weeks, but the Israeli establishment has remained tight-lipped, with only Bank of Israel Governor Stanley Fischer speaking publicly on the issue.

He insisted the central bank had contingency plans.

"One could imagine a situation of a wide-scale war with which it could be very difficult to deal," he said in a recent TV interview.

"We are ready to deal with the consequences of any event. We are prepared for all kinds of crises, we are prepared for a major crisis, for a far worse security situation," Fischer said, without elaborating.

"It's not my job to frighten anyone," he said, while pointing out that such a conflict would necessitate an increase in the defence budget.

"The main responsibility of any country is to ensure the security of the state and if there is a need to spend more money on national defence, we'll need to do that and to pay for it," Fischer said.

A central bank official told AFP that Israel had a "comfortable" foreign exchange reserve of $75.3 billion (61.28 billion euros).

"This gold mine should allow us to smoothly finance our imports in case of war and if necessary defend the shekel," he said, speaking on condition of anonymity.

The Manufacturers Association of Israel, the umbrella organisation of Israeli industry, said the European economic downturn was a more immediate worry.

"Right now, business leaders are more concerned about the risks of recession caused by the Euro crisis," said Danny Catarivas, the Association's head of international relations.

He recalled that during the 2006 summer war between Israel and Lebanon's Hezbollah, the Shiite militia fired over 4,000 rockets into northern Israel, forcing one million Israelis to take refuge in bomb shelters or move south.

"The economy experienced a slight slump before rebounding with a better-than-expected year-end result," Catarivas said.

Local media, however, took a more pessimistic view, noting in particular that trade on the Tel Aviv Stock Exchange had been very nervous lately.

Commentators warned that the shekel could be the "first victim of a war that has not yet begun," and said it was showing signs of weakness against the dollar and the euro.

An official at the Hoteliers' Association, meanwhile, said "the impact of rumours of an imminent war is beginning to be felt" in the tourism industry.

Military experts quoted by Israel's private Channel 10 TV have estimated that 50,000 rockets and missiles, fired either by Iran or Hezbollah, could fall in Israel.

And the cost of each day of war is estimated at $370 million (300 million euros) on the assumption that only half of the Israeli economy would be paralysed by such attacks.

Such an expense would force the treasury to slash civilian spending in order to boost the military's coffers, even though the defence budget, originally set at $13 billion this year, is set to rise to $15 billion even if no conflict erupts.

Last month the government began to put in place an austerity plan, which included a 1.0 percent increase in VAT and other measures that look set to affect the poorest sectors of society, to address a gaping budget deficit.

Tax revenues have fallen because of a slowdown in economic growth, which is expected to be 2.3 percent this year, compared with 4.7 percent in 2011, according to forecasts by Bank Hapoalim.