Israel boosts gas output and defense exports as energy and military sectors expand

Israel’s energy and defense sectors saw parallel expansion this week, as developments in natural gas production and major military export contracts underscored the country’s growing industrial output amid shifting global conditions.

Amid a slowdown in energy flows through the Strait of Hormuz, including liquefied natural gas exports that are important for European markets, Israel is emerging as a potential alternative supplier to Europe while also meeting its own domestic demand.

Israel's NewMed Energy, which holds a 45% stake in the Leviathan gas field, said this week that upgrades to the platform, completed in March 2026, had been expected to raise production capacity to around 14 billion cubic meters (BCM) per year. The company added however that "it has been proven that the maximum gas production capacity is, as of the date of approval of the report, 15.8 BCM per year."

A project partner said the revised 13% increase in estimates reflects more conservative assumptions used earlier in the planning process.

The additional capacity could increase supply availability for the domestic market, including a new power plant under construction in Hadera by OPC, which is expected to use natural gas as a primary fuel source. (OPC is the first and leading private electricity manufacturer in Israel.)

This will allow Leviathan to further expand production, leaving additional volume for exports. Higher production is also expected to support increased export volumes. Investors noted this week that a pipeline to carry natural gas from Ashdod to Ashkelon is scheduled for completion by the end of June. Another pipeline is also in advanced planning stages and is expected to further expand export capacity.

This comes after last week's announcement that Dalia Energy signed a 20-year deal with Leviathan to supply gas for the two power plants it is building in Eshkol and Tzafit. The deal is valued at around $US6.7 billion.

In the defense sector, Elbit Systems announced a $350 million contract to modernize main battle tanks for an undisclosed international customer. The upgrades include fire control systems, turret and gun drives, communications, and situational awareness systems. The contract is expected to be completed over four years and follows a series of similar deals linked to armored vehicle modernization programs.

Elbit CEO Bezalel Machlis said the company's integrated solutions allow them to "deliver comprehensive and integrated solutions that incorporate latest generation fire control, electro-optical, and communication systems, along with other state-of-the-art subsystems. This synergy enhances the effectiveness, connectivity, and survivability of main battle tanks, ensuring our customers maintain a decisive operational advantage.”