In the past couple of years, Israel has simultaneously conducted military missions on an increasingly diverse set of battlefields. Its military might has inflicted significant damage in the Gaza Strip and extended its operations to major urban locations in the West Bank. Areas like Jenin, Tulkarm, Nablus, Hebron, and regions near Jericho have been places of overnight searches, blockades, casualties, destruction, and forced relocations.
On the other hand, the Israeli military keeps a presence along the Lebanese border and has launched attacks on Syria and Yemen. Simultaneously, the Israeli government amplified its aggressive tactics against Iran, dubbing it as preemptive protection against an imagined nuclear danger.
Backed forcefully by the U.S., Israel is undergoing the costliest and most turbulent phase in its contemporary history. Its military expenditure had already increased by 65%, ascending to $46.5 billion in 2024, prior to the unfolding strife with Iran. The expenditure was largely due to the conflict in Gaza and confrontations with Hezbollah in Southern Lebanon.
Israel’s GDP invested in military costs rose to 8.8%, becoming the second highest worldwide. In March 2025, the Knesset sanctioned the national budget, assigning 109.8 billion shekels, equivalent to $29.9 billion, to the Defence Ministry. This figure represents the highest ever allocated for defense in the nation’s chronicles.
Military power hinges on a regular influx of funds. In absence of them, no war machinery could pay for its operational expenditures. To guarantee this, a transnational financing structure has been assembled converting military operations into strategic investments. Within this system, wars generate public debts, that are then structured as financial assets and marketed to global investors, leading to the availability of more funds.
International investment banks play the dual role of lining up governments’ liquidity requirements with investment opportunities and backing bond issuances that finance military expenditures. Following the onset of the crisis in Gaza in October 2023, Israel has released numerous government bonds, accumulating at least $19.4 billion between October 2023 and January 2025.
The rising focus on this matter by International institutions is noticeable. The International Court of Justice and the International Criminal Court are being appealed to and formally filed against. The calls intend to widen the scope of accountability to cover third parties, like financial contributors and economic players who empower or endorse such offenses.
Bonds are financial instruments states utlilise for deriving funds from markets. Buyers lend money to the government with the promise to receive the amount along with regular interest payment. To market these bonds globally and ensure their purchase, Israel has leaned on seven prime investment banks that act as underwriters, providing the issuing state with instant cash.
There’s been a wave of criticism stating that by accumulating capital for Israel’s government, these institutions enable activities that breach international law. Active campaigns target these financial institutions as collaborators with Israeli authorities and argue for cutting off ties.
Additionally, the demand for these financial instruments frequently exceeds the supply by fivefold due to global investors historically considering Israeli bonds as relatively safe bets. Case in point, in the first issuance of 2025, Israel acquired $5 billion while bond requests amounted to $23 billion. In another instance, the government harvested $8 billion from requests totaling $38 billion.
Repeated military incursions into Gaza have yielded significant economic repercussions for Israel. Renowned rating agencies like Moody’s, Fitch Ratings, and S&P Global took the unprecedented step of downgrading Israel’s sovereign rating reflecting worries about the increasing debt burden and future economic outlook.
The global BDS campaign gained momentum. Student groups, social organizations, activists initiated campaigns in prominent universities and main financial hubs. The end goal is to persuade asset managers, pension funds, and public bodies to gradually divest from Israeli assets. The potential legal and reputational risks associated with these investments are becoming increasingly transparent.
Israel’s pursuit of weaponry and public funds for national security has profoundly reshaped its economy. The substantial cost of its military operations is reflected in the historical rise in its defense spending, growing deficit, and escalating debt. Without disconnecting the profit streams derived from these conflicts, the continuous expansion of Israel’s assault on Palestinians and the wider region will persist.
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