Israel's economy grows nearly 10% despite war, international pressure

The Israeli economy has continued to grow despite three years of multifront war and mounting international pressure, including boycott calls to boycott Israel, according to new data released by the Bank of Israel.

The war, the longest in Israel’s modern history, has claimed the lives of more than 2,000 Israeli civilians and soldiers and imposed billions of dollars in economic costs. Nevertheless, Israel’s gross domestic product (GDP) has grown by nearly 10% since the Hamas-led Oct. 7, 2023, attack, according to recent economic data.

Israel’s stock market has also posted substantial gains. The Tel Aviv Stock Exchange’s benchmark TA-35 index, which tracks 35 leading companies, has risen by approximately 130% over the past three years. The TA-125 index, which tracks 125 leading Israeli companies, has gained around 120% over the same period.

Both indexes have outperformed major U.S. stock-market benchmarks since October 2023. The S&P 500, which tracks 500 leading American companies, has risen by approximately 80%, while the technology-heavy Nasdaq Composite has gained around 101%. Although U.S. markets have also recorded substantial gains, both have lagged behind Israel’s leading indexes over this period.

Despite these gains, the war has exacted a significant economic toll. Bank of Israel estimates indicate that the conflict had reduced Israel’s economic output by approximately NIS 177 billion, about $58 billion, by the end of 2025. The estimated loss amounted to roughly 8.6% of Israel’s annual GDP, which exceeded $600 billion in 2025.

Nevertheless, economic projections suggest that Israel could benefit from a sustained reduction in regional hostilities. In December 2025, the Organisation for Economic Co-operation and Development (OECD) projected an economic recovery following the U.S.-brokered Gaza ceasefire reached in October 2025.

“The private sector will lead the economic expansion as military expenditure contracts,” the OECD stated in its report on the Israeli economy. “Investment will be strong given the backlog accumulated during the war [and] improved household confidence amid more peaceful conditions will support private consumption."

Israel’s technology sector remains a major driver of economic growth and exports. According to the Israel Innovation Authority (IIA), Israeli high-tech exports reached $85 billion in 2025, accounting for approximately 58% of the country’s total exports. Growth was driven largely by software and other technology products for civilian markets.

The defense industry has also contributed significantly to the growth of Israeli exports. The wars in Ukraine, Gaza, Lebanon and Iran have increased international demand for Israeli military technologies, including air-defense systems, with countries such as Germany, Greece and Finland among the customers for Israeli defense platforms.

In March, Israel reportedly surpassed the United Kingdom to become the world’s seventh-largest arms exporter, according to the Stockholm International Peace Research Institute (SIPRI). Separately, Israeli defense exports reached a record $19.2 billion in 2025, according to Israeli defense industry data. That represented an increase of nearly 30% over 2024 and marked a fifth consecutive annual record.