Israel’s military spending reached percent of GDP in 2025, up sharply from recent years. The rise reflects the country’s response to the war with Hamas, which began in October 2023 and, by 2026, had widened to include hostilities in Lebanon, Yemen and Iran. The fiscal strain of the war was also apparent in the county's national debt figures. It rose by at least percent since that start of the war in Gaza.
Conflicts overshadow fiscal discipline
Israel's military allocation has risen sharply, nearly doubling compared to pre-war levels. Since the war began, actual defense spending has significantly surpassed the allocated budget every year, leaving fiscal discipline a secondary concern. This reflected the nation's intensified emphasis on military preparedness amidst escalating geopolitical tensions. The bulk of this budget is earmarked for procurement.
Record-breaking arms exports
As Israel ramped up its military spending, the country's defense industries have also reached new heights. In 2024, the value of arms exported from Israel reach billion U.S. dollars, marking the third consecutive annual record. Air defense systems were the most popular product category that year, accounting for nearly half of all defense exports. The industry’s performance points to firm global demand for military equipment, including Israeli systems.
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