Late last year, the Economist published an article titled “Which economy did best in 2025?” The annual ranking of 36 mostly rich countries, conducted for the fifth year in a row, aimed to pinpoint the “economy of the year”.
The Economist compiled data on five indicators: inflation, GDP, jobs, stock market performance, and “inflation breadth”, measuring the share of product categories with an annual price increase of more than two percent.
Countries were ranked on each measure, creating an “overall score of economic success” in 2025. To my surprise, Israel ranked third, after Portugal and Ireland.
Two main indicators have driven this “economic success”. Israel’s economy recorded a GDP growth rate of 3.5 percent, surpassing the global average of around 3.2 percent. More surprisingly, its stock market soared, with share prices growing by 53 percent over the previous year – outperforming the world’s major stock markets.
Although Israel has been waging war on Gaza for more than two years now, such figures typically reflect a strong economy, with companies reporting solid earnings and growth, and domestic and foreign investors expressing their confidence in the country.
According to a Times of Israel report, foreign investors “flocked to Israeli markets to buy shares starting in mid-2024 after a sell-off at the outbreak of the war in 2023”.
Citing data from the Tel Aviv Stock Exchange, the report noted that as of last September, “the value of holdings by foreign financial institutions in Tel Aviv stocks, excluding dual-listed stocks, reached a historic record of $19.2 billion, more than double the figure before the outbreak of war”.
Feedback loop
Much coverage of this issue has focused on Israel’s stock market being heavily weighted towards technology companies, amid a broader tech boom. To bolster economic resilience, the International Monetary Fund has cited the need for Israel to further enhance its “competitive edge in high-tech and AI”.
World Bank data clearly shows the Israeli tech boom, with a steady increase in high-technology exports as a percentage of manufactured exports in recent years: 37 percent in 2024, up from just eight percent in 2006.
Israeli research institutions talk about the country’s high-tech sector acting as a primary economic engine over the past decade, accounting for more than 40 percent of the country’s GDP growth between 2018 and 2023. Around 400,000 people are employed in the high-tech sector, which accounts for one-fifth of Israel’s total GDP.
According to the Strategy International think-tank, Israel’s “unique” fusion of technology and defence, including the “tight-knit relationship between the military, academia, and private tech industries” has created a feedback loop that “continuously drives technological advancements” in cybersecurity, surveillance and AI-driven intelligence systems.
But what does this feedback loop really mean? Author Antony Loewenstein has explored Israel’s continuous testing and development of tech systems in his book The Palestine Laboratory: How Israel Exports the Technology of Occupation Around the World, which describes how occupied Palestine is used as a brutal testing ground for military technology.
And yet, despite the ongoing genocide in Gaza, Israel’s economy is still celebrated by international financial institutions and knowledge indices. The latest Global Innovation Index, published by a UN agency, ranks Israel 14th out of 139 economies; among northern African and western Asian countries, it ranks first.
Automated repression
Separately, the UN has acknowledged the role of corporate entities in sustaining Israel’s illegal occupation and ongoing genocidal campaign.
In a report published last summer, titled “From economy of occupation to economy of genocide”, UN special rapporteur Francesca Albanese described Israel’s military-industrial complex as the state’s “economic backbone”.
“Repression of Palestinians has become progressively automated, with tech companies providing dual-use infrastructure to integrate mass data collection and surveillance, while profiting from the unique testing ground for military technology offered by the occupied Palestinian territory,” the report noted, adding that this economy is “fuelled by United States tech giants establishing subsidiaries and research and development centres in Israel”.
A recent article published on the Israeli business news site Calcalist perfectly described the situation, noting that the country’s tech sector has “turned crisis into catalyst”, with 2025 recording a surge in mergers, acquisitions and initial public offerings.
Defence-driven innovation has played a key role, the report noted: “Israel’s ability to integrate military research with civilian entrepreneurship proved decisive.”
Contrary to standard neoliberal structural reform recipes, the “enduring synergy” between the state’s public and private sectors – especially in research and development – seems to be a successful strategy for Israel.
But what does this economic comeback really show? Foreign investors appear convinced that the tech-driven Israeli economy can deliver – but deliver what, exactly?
The answer today is clear: genocide of the Palestinian people.