While AI-equipped surveillance systems are being developed in Tel Aviv, Gaza suffers from a lack of necessities like internet access and baby formula. As villages in the West Bank disappear daily, startups emerging from Israel’s tech clusters raise billions from Silicon Valley investors. This is not just inequality; it is a morally fraught contradiction that Israel itself has engineered, masked by technology. This paradox is no accident; it is the product of a system legitimized by security concerns and marketed as an economic asset.
Today, Israel is not only a military actor but also a data state, an exporter of surveillance technologies and a global high-tech brand. Companies like the NSO Group, with its Pegasus spyware, and Rafael, known for its air defense systems, dominate world markets with products tested in conflict zones. Yet, Israel’s power stems less from industrial capacity and more from perpetuating crises that can be exploited economically.
The fundamental question is this: Does aggression generate Israel’s economic strength, or does economic power enable Israel’s aggression? Current evidence suggests a mutually reinforcing cycle. The more security threats are produced, the greater the demand for technologies designed to counter them, boosting Israel’s exports, foreign direct investment and global market access. However, this model is sustained by reproducing its crises, resembling a precarious façade of prosperity built on high risk rather than sustainability.
How much longer can Israel sustain its current economic model while disregarding global conscience and international law? An economy fueled by conflict loses meaning in peace conditions and becomes fragile within a global system attentive to ethical values. Israel’s current economic performance reflects not a durable development model but a structure that profits from crises rather than manages them. Whether this model can survive a genuine peace remains uncertain.
This analysis is not an endorsement of Israel’s technology-driven economy; rather, it aims to critically examine the structural inequalities, ethical violations and global silences underpinning it. The goal is not only to understand today’s reality but to question how far Israel can continue down this unsustainable path, and to emphasise that peace is both economically feasible and necessary.
Israel has emerged as a global hub in high technology. From AI and biotechnology to cybersecurity and surveillance, its innovation ecosystem thrives with investments from tech giants like Google, Microsoft, Intel and Meta in R&D centers located in Tel Aviv, Herzliya and Haifa. The “Start-Up Nation” narrative, frequently praised by global media, represents this digital transformation.
However, Israel’s technological success is not limited to civilian innovation but is deeply intertwined with military R&D. Products such as NSO Group’s cyber surveillance software, Rafael’s air defense systems and Elbit Systems’ drones are at the center of ethical debates. A significant portion of these technologies are tested in conflict zones like Gaza, the West Bank and Lebanon, marketed with the “field-tested” label – turning war zones into laboratories of innovation.
This development model integrates military R&D into the civilian economy, prioritizing security threats over humanitarian needs. In 2023, Israel’s high-tech exports surpassed $71 billion, with more than 20% comprising military or dual-use technologies according to the Israel Export Institute.
Israel’s technological rise is shaped by the strategic choices of global capital. In 2022, $22 billion in foreign direct investment flowed from the U.S., Germany and the UAE, predominantly directed toward companies in border security, surveillance and cyber defense, supporting not only economic growth but also financing conflict technologies.
Major tech companies channel this capital, facilitating the global distribution of technologies developed in Israel’s R&D hubs. This dynamic raises critical questions about the ethical responsibilities of global investors.
Ignoring the ethical implications of technological advances, investors prioritise short-term gains. As ESG (Environmental, Social, Governance) standards gain prominence, investments flowing into Israel’s military-civil tech complex contradict these principles, revealing global capital as a financier of conflict-perpetuating cycles.
Western countries impose stringent sanctions on certain states aligned with strategic and economic interests, but avoid similar measures against Israel. The U.S. provides approximately $4.5 billion annually in military and economic aid, while the European Union maintains robust investment and cooperation ties, clear evidence of a double standard. This stance enables Israel to sustain economic growth amid regional conflicts and to position itself as a strategic global player.
Conversely, sanctions on economic competitors such as Russia, Iran and China have led to significant disruptions in global markets. The lack of sanctions on Israel contributes to ongoing regional instability and heightens global economic risks. Selective sanction policies generate uncertainty among investors and trade networks, increasing market volatility.
This approach is more than diplomatic convenience; it represents a complex strategy with potential threats to global economic stability and regional peace. The absence of sanctions on Israel weakens international law and undermines efforts toward sustainable development and fair economic cooperation, creating a critical dilemma for global economic and peace agendas.
According to the IMF’s 2024 report, Israel’s nominal GDP is approximately $540 billion, ranking 28th globally. Within the Middle East and North Africa region, it is the third-largest economy after Saudi Arabia and the UAE. Israel’s per capita income is estimated at around $54,000 in 2024, placing it 20th worldwide among developed nations. These figures highlight Israel as a regional power with a high per capita income.
The high-tech sector drives more than 40% of Israel’s exports, acting as the engine of its economy. Advances in software, biotechnology and defense technologies boost the global competitiveness of Israeli firms and attract significant foreign direct investment.
Nonetheless, Israel’s economy is shaped by complex dynamics stemming from war and conflict. The IMF’s 2024 Middle East Report notes a 1.8% growth in 2023 and a 1% growth in 2024 (while recording a 6.3% growth in 2022), driven by declining consumer confidence and reduced investment appetite. Despite defence and tech sectors benefiting from crises, the broader economy faces mounting risks linked to ongoing conflicts.
Socially, disparities persist. The Israel Central Bureau of Statistics (2024) reports low unemployment but high income inequality and poverty, especially among Palestinian citizens, with about 20% living below the poverty line. This gap reveals that technological and economic growth remain socially exclusive.
Israel’s technological achievements and conflict cycle are inseparable. Innovation stems not from freedom but from instability and insecurity. The technology sector essentially functions as the civilian extension of the security industry. Israel’s global competitiveness depends on an economic model rooted in conflict, sustainable only in a world where instability is normalised.
This reality underscores the critical role of global capital in financing war. Ethical and strategic responsibilities of investors must be reevaluated, as socio-economic inequalities and regional uncertainties pose fundamental barriers to sustainable development.
While Israel’s high-tech successes support economic growth, long-term resilience is unattainable without regional stability and social cohesion. Building a new economic model founded on peace and justice is imperative for Israel and the wider region.
