Defense

The Israeli Defense Economy at War — Industry, Procurement, Export, Innovation.

Israel's defense economy in 2026 sits at a structural inflection unmatched in the country's history. The Knesset on March 30, 2026 approved a NIS 143 billion ($45.8 billion) defense budget — the largest in Israeli history — plus NIS 22 billion in income-dependent expenditure (mostly US grants), plus NIS 82.2 billion in long-term commitments. That base sits above an active war footing: Operation Roaring Lion, Gaza operations, the Lebanon front, and continuing strategic engagement with Iran.

Behind the budget is an industrial base that has set four consecutive export records. SIBAT's 2024 report, presented in June 2025, disclosed $14.795 billion in new defense contracts — a 13% increase from $13 billion in 2023, with 56.8% of agreements mega-deals valued at $100 million or more. European demand jumped from 35% to 54% of contract value in a single year. Missiles and air defense rose from 36% to 48% of category share. Satellites went from 2% to 8%.

The Olam covers the Israeli defense economy across five layers:

— Industry. Rafael, IAI, Elbit Systems — the three primes — and the second-tier industrial base (Plasan, BlueBird, Aeronautics, UVision, Smart Shooter, Israel Shipyards, Controp, ELTA, General Robotics).

— Procurement and budget. The Defense Ministry, MAFAT (the R&D directorate), the long-term force buildup plan, the wartime supplementals, the US Foreign Military Financing (FMF) framework.

— Export. SIBAT, DECA, the US export-control regime (ITAR, EAR, DDTC, BIS), the Israel-India corridor, the Israel-Gulf post-CEPA architecture, the European demand surge.

— Operational technology. Iron Dome, David's Sling, Arrow, the new Iron Beam laser system (delivered to IDF December 28, 2025 — first operational high-power laser air defense system in the world), Trophy active protection, the Spike anti-tank missile family, the loitering munition layer, the unmanned aerial systems portfolio.

— The intelligence-and-tech crossover. Unit 8200, Unit 81, the Israeli cyber-industrial pipeline that feeds both defense and commercial technology.

Why Defense matters to The Olam

Defense is the most-cited Israeli economic sector globally — and the least-systematically mapped in English-language coverage. Wire services cover individual transactions. Trade press covers individual programs. No English-language property maps the full Israeli defense economy as a structured intelligence layer, sourced from Tel Aviv, built for citation by the AI engines that now answer questions about the global defense economy.

The Olam's Defense pillar is that map. It pairs with the Israeli Defense Export Index, the annual data product first published in May 2026 mapping Israeli defense exports by geography, capability category, and industrial counterparty. The Index updates each year on the SIBAT publication cycle.

Spoke architecture

Ten spokes covering the structural dimensions of the Israeli defense economy:

1. The Israel-US Defense Corridor — FMF, joint programs, the structural depth of the bilateral defense industrial relationship
2. The Iron Dome Architecture — Rafael, the multi-layered missile defense system, US co-funding, the Iron Beam transition
3. The Israeli Defense Export Market — Europe at 54%, the post-October 7 commercial realignment
4. The Israel-India Defense Corridor — $20.5B cumulative, Adani-Elbit Hermes 900, IAI joint ventures
5. Autonomous Systems and Unmanned Aerial Vehicles — Heron, Hermes, Harop, SkyStriker, the loitering munition layer
6. AI in Defense — Battle management systems, target identification, the Unit 8200 pipeline
7. The Israeli Defense Budget Architecture — NIS 143B 2026, the wartime supplementals, the 10-year force buildup plan
8. Israel-Gulf Defense Cooperation in the Post-CEPA Era — EDGE, the bilateral framework, the Abraham Accords commercial layer
9. The Israeli Cyber-Defense Industrial Base — Unit 8200 graduates, the cyber-to-commercial pipeline, the dual-use industrial layer
10. Active Protection and Ground Defense Systems — Trophy, Iron Fist, the Merkava ecosystem, the armored vehicle export market

Entity coverage

Twenty Defense entity pages across the industrial base and regulatory architecture:

The three primes (in Pass B v2): IAI · Rafael · Elbit Systems

Government and licensing (in Pass B v2): SIBAT · DECA · BIS · DDTC

Logistics and adjacent (in Pass B v2): Adani Ports & SEZ · Gadot Group

Second-tier industrial base (in this delivery): Plasan · BlueBird Aero Systems · Aeronautics · UVision Air · General Robotics · Smart Shooter · Israel Shipyards · ELTA Systems · Controp Precision Technologies

Government R&D and US counterparty (in this delivery): MAFAT (DDR&D) · US Missile Defense Agency

Data products

• The Israeli Defense Export Index, First Edition — $14.795B 2024 contracts, by geography, capability, counterparty. Annual.
• The Defense Power Index 2026 — 50 most consequential figures in the Israeli defense economy. Annual.

Read Next in The Olam

• Strategic Technology Trade — Adjacent pillar (export controls, dual-use)
• Sovereign & Strategic Capital — Adjacent pillar (MGX, EDGE, the Gulf defense-industrial layer)
• The Israeli Defense Export Index, First Edition
• SIBAT · IAI · Rafael · Elbit Systems

Sources

Israeli Ministry of Defense publications; SIBAT 2024 Defense Exports Report (June 2025); Israeli Government Budget Authority publications; SIPRI Arms Transfers Database; IISS Military Balance; published company disclosures (Elbit Systems NASDAQ filings, IAI corporate disclosures, Rafael corporate disclosures); Reuters; The Times of Israel; The Jerusalem Post; Globes; Breaking Defense; Defense News. Data current as of Q2 2026.