diff --git a/checkov/terraform/graph_builder/foreach/abstract_handler.py b/checkov/terraform/graph_builder/foreach/abstract_handler.py
index e83e08338ca..7e684805617 100644
--- a/checkov/terraform/graph_builder/foreach/abstract_handler.py
+++ b/checkov/terraform/graph_builder/foreach/abstract_handler.py
@@ -131,12 +131,11 @@ def _update_attributes(self, attrs: dict[str, Any], key_to_val_changes: dict[str
                                 if attrs[k][0] == dollar_wrapped_str_to_replace:
                                     attrs[k][0] = inner_value
                                     v_changed = True
-                                    break
+                                    continue
                                 elif dollar_wrapped_str_to_replace in attrs[k][0]:
                                     str_to_replace = dollar_wrapped_str_to_replace
                                 attrs[k][0] = attrs[k][0].replace(str_to_replace, str(inner_value))
                                 v_changed = True
-                                break
                     else:
                         attrs[k][0] = attrs[k][0].replace("${" + key_to_change + "}", str(val_to_change))
                         if self.need_to_add_quotes(attrs[k][0], key_to_change):
diff --git a/tests/terraform/graph/variable_rendering/test_renderer.py b/tests/terraform/graph/variable_rendering/test_renderer.py
index e3bcacf7cb7..f01210c3a0a 100644
--- a/tests/terraform/graph/variable_rendering/test_renderer.py
+++ b/tests/terraform/graph/variable_rendering/test_renderer.py
@@ -486,3 +486,11 @@ def test_foreach_with_tfvars(self):
                 "role": ["roles/run.developer"],
             },
         )
+
+    def test_foreach_with_tfvars_tag_merge(self):
+        resource_path = os.path.join(TEST_DIRNAME, "test_resources", "dynamic_blocks_tfvars_merge")
+        graph_manager = TerraformGraphManager('m', ['m'])
+        local_graph, _ = graph_manager.build_graph_from_source_directory(resource_path, render_variables=True)
+        resources_vertex = list(filter(lambda v: v.block_type == BlockType.RESOURCE, local_graph.vertices))
+        self.assertDictEqual(resources_vertex[0].config['aws_instance']['this["vm1"]'].get('tags')[0],
+                             {'Environment': 'prod', 'Department': 'Testing', 'Name': 'vm1'})
diff --git a/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/main.tf b/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/main.tf
new file mode 100644
index 00000000000..8a926032043
--- /dev/null
+++ b/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/main.tf
@@ -0,0 +1,11 @@
+
+resource "aws_instance" "this" {
+  for_each = { for host in var.vmhosts : host.name => host }
+
+  instance_type          = var.instance_type
+  key_name               = var.key_name
+  private_ip             = each.value.private_ip
+  
+  tags = merge(each.value.tags, { Name = each.value.name }, {})
+
+}
diff --git a/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/terraform.tfvars b/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/terraform.tfvars
new file mode 100644
index 00000000000..98c96cd8654
--- /dev/null
+++ b/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/terraform.tfvars
@@ -0,0 +1,16 @@
+
+key_name                = "test1"
+vmhosts = [
+    {
+        name            = "vm1"
+        tags            = { Environment = "prod", Department = "Testing" }
+        private_ip      = "11.101.33.254"
+        ports           = [ 22 ]
+    },    
+    {
+        name            = "vm2"
+        tags            = { Environment = "Test" }
+        private_ip      = "22.212.0.200"
+        ports           = [ 80 ]
+    }      
+]
diff --git a/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/variables.tf b/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/variables.tf
new file mode 100644
index 00000000000..01e81cfbb0d
--- /dev/null
+++ b/tests/terraform/graph/variable_rendering/test_resources/dynamic_blocks_tfvars_merge/variables.tf
@@ -0,0 +1,17 @@
+variable "instance_type" {
+  default = "t3.small"
+}
+
+variable "key_name" {
+  type = string
+}
+
+variable "vmhosts" {
+  description = "VM hosts with configuration"
+  type = list(object({
+    name           = string
+    tags           = map(string)
+    private_ip     = string
+    ports          = list(number)
+  }))
+}
\ No newline at end of file