Israel’s GDP has increased by nearly 10 percent since the start of the war.
By Ailin Vilches Arguello, The Algemeiner
Israel’s economy has shown a striking display of resilience over the past three years, continuing to grow and outperform major global markets even on the third anniversary of the Hamas-led Oct. 7, 2023, invasion and massacre, despite a prolonged multi-front war and growing international efforts to economically isolate the Jewish state.
Three years of war have come at a staggering cost to Israel, with millions of lives affected, families still carrying the scars of the conflict, and the government spending heavily to sustain the effort. Yet the economy has continued to expand despite the enormous burden.
According to Bank of Israel data, the country’s gross domestic product (GDP) — the total value of goods and services produced in Israel — has increased by nearly 10 percent since the start of the war.
The Tel Aviv Stock Exchange has seen an even stronger rise. Its main TA-35 index, which tracks the largest companies on the exchange, has climbed about 130 percent since the Oct. 7 attack, while the broader TA-125 index, covering 125 major Israeli companies, has gained about 120 percent.
Compared with major US stock indexes, Israel’s gains are even more striking. Over the last three years, the S&P 500, which tracks 500 major US companies, has risen by about 80 percent, while the Nasdaq, which is heavily focused on technology companies, has climbed roughly 101 percent — both below the gains recorded by Israel’s leading stock indexes.
However, the strong market performance does not erase the severe economic costs of three years of war, which have strained Israel’s public finances, disrupted businesses, and placed a heavy burden on the country’s economy as a whole.
According to the Bank of Israel, the war caused Israel’s economy to produce about 177 billion shekels less than it was expected to produce by the end of 2025 — a loss equivalent to 8.6 percent of the country’s annual GDP.
Yet despite that cost, the Israeli economy has continued to show an ability to absorb major shocks and recover.
Experts point to several factors behind that resilience, including the country’s strong technology sector, its global trade ties, and the continued strength of its defense industries.
Israel’s high-tech sector, a cornerstone of the country’s economy, has remained closely tied to global markets throughout the war, helping companies maintain business abroad even as the conflict disrupted activity at home.
Strong international connections and the widespread use of remote work are key factors that have allowed many firms to keep operating and serving clients despite the challenges posed by the war.
According to the Israel Innovation Authority, high-tech exports reached $85 billion in 2025, accounting for about 58 percent of Israel’s total exports, with the sector’s services exports — including software and other technology services — driving most of the growth.
The defense industry has provided another major source of growth.
Even as Israel has faced mounting international criticism over the war in Gaza, including growing calls in Europe for arms embargoes and restrictions on defense deals, the country’s defense industry has continued to attract strong demand abroad.
European governments have sharply increased military spending since Russia’s invasion of Ukraine, and countries have continued turning to Israeli weapons and defense technology after years of combat have demonstrated their operational effectiveness and battlefield performance.
According to Israel’s Defense Ministry, defense exports reached a record $19.2 billion in 2025, marking a nearly 30 percent increase from the previous year and the fifth consecutive annual record — with more than half of the deals valued at over $100 million.
Earlier this year, Israel even became the world’s seventh-largest arms exporter, surpassing Britain for the first time and further cementing its position among the world’s leading defense suppliers.
According to the Stockholm International Peace Research Institute, Israeli companies accounted for 4.4 percent of global arms exports between 2021 and 2025, up from 3.1 percent during the previous five-year period.
Another sign of the economy’s ability to withstand the shock of the war has been the recovery of the Israeli shekel.
The shekel came under sharp pressure in the immediate aftermath of the Oct. 7 atrocities, as uncertainty over the war sent the dollar above four shekels. In response, the Bank of Israel moved to calm financial markets, announcing plans to sell up to $30 billion in foreign currency to support the shekel and maintain market stability.
Three years later, the picture has changed dramatically. The dollar is trading at around 3.08 shekels, nearly 20 percent below its level at the start of the war, reflecting a sharp recovery in the Israeli currency.
Economists attribute the shekel’s rebound to the resilience of Israel’s exports, continued foreign investment, and the economy’s ability to maintain activity despite the prolonged conflict.
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