The Israeli city also rose above Singapore and took the top spot for the first time thanks to soaring inflation and supply-chain issues pushing up prices globally.
Iran’s capital Tehran was the biggest climber, overtaking 50 countries to reach 29th place after US sanctions were imposed.
Meanwhile Damascus, the oldest capital in the world, remains the cheapest city to live in as war-torn Syria’s economy struggles.
London climbed three places to 17th in the The Worldwide Cost of Living Index by the Economist Intelligence Unit (EIU).
The annual survey is compiled by comparing prices in US dollars for goods and services in 173 cities.
Paris and Singapore came joint second place followed by Hong Kong and Zurich.
New York came in sixth with Geneva in seventh, Copenhagen eighth, Los Angeles ninth and Osaka 10th.
In Australia, Sydney rose one to 14th and Melbourne rose two to 16th.
The inflation rate of the prices across cities tracked in the survey is the fastest recorded over the past five years - at 3.5 per cent.
It means Londoners are among city dwellers seeing the fastest rise in the cost of living in five years.
The findings show prices for the goods and services have risen by an average 3.5 per cent year on year in local-currency terms, compared with an increase of just 1.9 per cent this time last year.
Transport costs rose most rapidly in this year’s survey, mainly due to rising oil prices driving a 21 per cent increase in the price of unleaded petrol.
However, tobacco and personal care categories also showed strong increases.
These numbers exclude four cities suffering from very high inflation—Caracas, Damascus, Buenos Aires and Tehran.
The data were collected between August 16 and September 12 2021 when freight rates and commodity prices were continuing to rise across the world.
Combined with fluctuating consumer demand and exchange-rate shifts, the resulting supply problems have fuelled price rises in the world’s major cities.
The rankings continue to be sensitive to shifts brought about by the Covid-19 pandemic.
