Extreme crises hold the potential to unite societies, but also to deepen sociopolitical divisions. The ability of societies to walk in one track rather than the other depends on political leadership, pre-crisis relations between groups, and on the behavior – real and perceived – of these groups during the crisis. This paper asks whether and how does social identity effect the perception of reality under a common threat. We utilize the fact that the first wave of the Covid-19 pandemic has hit Israel’s regions and social groups unevenly, and thus created differences in groups’ morbidity rates – for studying ingroup and outgroup morbidity perceptions. We find that minority groups tend to overestimate outgroup morbidity and underestimate ingroup morbidity, especially when they themselves are characterized by high morbidity rates. These estimations are debiased when people are asked to reflect on their situation. In addition, we find evidence for ingroup bias in the support for differential policy toward cities (implied groups). The importance of our findings lies in showing that perceptions of outgroup situation can reflect intergroup relations, but may also enhance further deterioration in social divide, hence should also be key for avoiding such deterioration at times of extreme crises.