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The Palestinian Authority is facing the possibility of financial collapse, the World Bank said in a report Thursday, as revenue streams run dry and economic activity drops precipitously against the backdrop of the war on Gaza.

"The fiscal situation of the Palestinian Authority has dramatically worsened in the last three months, significantly raising the risk of a fiscal collapse," the World Bank said in a statement.

"Revenue streams have largely dried up due to the drastic reduction in clearance revenue transfers payable to the Palestinian Authority and a massive drop in economic activity."

The authority's deficit is expected to reach $1.2 billion in the coming months, doubling the funding gap of $682 million at the end of 2023.

The Palestinian economy was projected to contract between 6.5 and 9.6 percent, although the Bank noted that the outlook remains "highly uncertain."

"Increased foreign assistance and the accumulation of further arrears to public employees and suppliers are the only available financing options for the Palestinian Authority," the World Bank said.

The war on Gaza broke out after Hamas's unprecedented 7 OctoberÌýattack on southern Israel.

Israel's retaliatory offensive has killed at least 35,800 people in Gaza, mostly women and children, according to the Gaza Health Ministry.

At the same time, violence has also surged in the West Bank, which Israel has occupied since 1967 and where the Palestinian Authority exercises limited rule.

At least 518 Palestinians have been killed since 7 October by Israeli troops or settlers in the territory, according to Palestinian officials.

Close to half a million jobs in the Palestinian economy have been lost since October 2023, according to the World Bank.

That includes an estimated loss of 200,000 jobs in the Gaza Strip and nearly 150,000 jobs in Israel held by people living in the West Bank.

Poverty has increased, and "at present, nearly every Gazan lives in poverty," the World Bank said.