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Israel Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2022-2027

The defense budget in Israel is valued at $20.7 billion in 2020. The market is expected to grow at a CAGR of over 3% during the forecast period 2021-2026. Over the historic period, the surge in Israel’s defense expenditure was primarily driven by the need to fund ongoing defense modernization programs. Israel is surrounded by geopolitical rivals and hostile enemies compel the nation to maintain a robust defense posture to deter any possible military action against the country’s strategic interests. It thus has traditionally chosen to prioritize the development of robust offensive military capabilities to deter hostile states.

Over the forecast period, Israeli defense expenditure is anticipated to benefit from an overall improvement in the country’s economy and political stability which was absent since 2018. With successive governments failing to reach an understanding of the country’s opposition over the passage of a budget, parliament has failed to pass a budget since 2019. As such the formation of the new government under Naftali Bennett is anticipated to pave the way for greater understanding and ease in the law-making process.

Overview of the defense market in Israel

Overview of the defense market in Israel

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Military doctrine, modernization goals, and Israel’s national defense strategy

It is the mission of the Israeli Defense Forces (IDF) to safeguard territorial integrity, defend the existence and sovereignty of Israel defend Israeli citizens, and fight against all forms of terrorism which may pose threat to routine life. The national objectives of the Israeli national security doctrine include safeguarding and protecting the existence of the state of Israel and defending the security and the territorial integrity of the state while protecting its inhabitants and citizens. The Israeli state depends on a defensive security strategy to guarantee the country’s existence, neutralizing threats, developing an effective deterrence as needed, and avoiding confrontations. The assumption that the enemy can only be defeated by an offensive posture forms the foundation of the Israeli offensive military concept. As such Israel deems it essential to employ force to attain well-defined military objectives.

Israel will focus on reinforcing its strategic cooperation with the US and developing a close strategic relationship with other key countries in addition to setting up and strengthening support centers worldwide. The Israeli state will focus on strengthening and honoring the previously signed peace agreements as well as explicitly focusing on maximizing the possibility of cooperation with other moderate elements active within the Middle East region. The Israeli military doctrine explicitly calls for preserving the relative advantage built upon human quality, advanced technological capabilities in weapon systems, and various sources of intelligence.

How has COVID-19 affected the Israel defense spend?

The defense sector, which was already reeling from political instability due to the inability to pass a budget in 2020, was struck by the COVID-19 outbreak. Some level of the economic damage was inevitable due to COVID-induced lockdowns. Real GDP declined from $319.1 billion in 2019 to $311.5 billion in 2020. However, the country managed to mitigate extensive damage to the economy by effectively containing the COVID-19 outbreak.

With the COVID crisis presenting the single largest instance of non-military national crisis, the country responded with a high level of alacrity to contain and mitigate the crisis. Israel’s initial response to the COVID-19 outbreak was a demonstration of its systematic security-oriented approach to a national crisis of a non-military nature. Israel mainly succeeded in precluding a rampant spread of pandemic by fully mobilizing the government apparatus and its agencies, at the expense of civil liberties and protections. The country essentially repurposed its counter-terrorism surveillance to closely track rising infections. Although controversial, the Israeli intelligence apparatus enjoyed a much greater latitude and was empowered to acquire requisite medical supplies and equipment.

What are the segment classifications in the defense market in Israel?

The defense market in Israel is segmented into platform based MDS, multi-role aircraft, infrastructure construction, infantry fighting vehicle, and others. Platform based MDS is the largest segment in the defense market in Israel followed by multi-role aircraft and infrastructure construction. The most attractive sectors in the Israeli defense market are missiles and missile defense systems, military fixed-wing, and military land vehicles.

Missiles and missile defense systems rank as the single largest sector in the Israeli defense market. Platform based missile defense systems feature as the single largest sub-sector. Israel and the US have co-developed an entire family of Arrow missile defense systems encompassing the Arrow 1, Arrow 2 (Block-2, Block-3, Block-4, and Block-5), Arrow 3, and the Arrow 4 missile defense system in addition to David’s Sling missile defense system. However, the country has also independently developed the Iron Dome missile defense system to intercept rockets attacks against Israel. However, the growth in the sector will mainly be driven by the Anti-Tank Guided Missile (ATGM) segment during the forecast period.

Defense market in Israel, by segment

Defense market in Israel, by segment

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What are the import and export market dynamics in Israel’s defense market?

Although Israel has one of the most advanced domestic defense industrial complexes in the Middle East, which is capable enough to meet most of its strategic requirements in house, the country’s position as the single largest beneficiary of US Foreign Military Financing (FMF) aid compels the country to spend all of its funds on acquiring weapon systems from US suppliers. As such the US accounts for an overwhelming 91.5% share of the Israeli market, with Germany and Italy ranking as the distant second and third largest suppliers accounting for a share of over 5% and 2% respectively. India with a market share of over 42% is the single largest market for Israeli defense exports, while Azerbaijan and Vietnam with shares of over 16% and 11%, rank as the second and third largest defense markets.

Who are the major market players in the defense market in Israel?

Major market players in the defense market in Israel include General Dynamics, Navistar Defense, Rafael Advanced Defense Systems, and Israel Aerospace Industries (IAI).

Defense market in Israel, by key players

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Market report scope

Market size (Year – 2020) $20.7 billion
Growth Rate CAGR of >3% from 2021 to 2026
Base year 2020
Forecast Period 2021-2026
Segmentation Platform based MDS, Multi-role aircraft, Infrastructure construction, Infantry fighting vehicle, and others
Key players General Dynamics, Navistar Defense, Rafael Advanced Defense Systems, and Israel Aerospace Industries (IAI)

This report provides a comprehensive analysis of the defense market in Israel and contains an in-depth analysis of the following:

  • Israel’s defense budget: Detailed analysis of Israel’s FY2021 defense budget broken down into market size and market share. This is coupled with an examination of key current and future acquisitions.
  • Regulation: The procurement policy and the process is explained. This is coupled with an analysis of Kuwait’s military doctrine and strategy to provide a comprehensive overview of Israel’s military regulation.
  • Security Environment: Political alliances and perceived security threats to Israel are examined; which will help to explain trends in spending and modernization.
  • Import and Export Dynamics: Analysis of prevalent trends in the country’s imports and exports over the last five years
  • Competitive landscape and strategic insights: Analysis of the competitive landscape of the Israel defense industry.

Reasons to Buy

  • Determine prospective investment areas based on a detailed trend analysis of the Israel defense market over the next five years.
  • Gain an in-depth understanding of the underlying factors driving demand for different defense and internal security segments in the Israeli market and identify the opportunities offered.
  • Strengthen your understanding of the market in terms of demand drivers, market trends, and the latest technological developments, among others
  • Identify the major threats that are driving the Israel defense market providing a clear picture about future opportunities that can be tapped, resulting in revenue expansion
  • Channel resources by focusing on the ongoing programs that are being undertaken by the Israeli government.
  • Make correct business decisions based on in-depth analysis of the competitive landscape consisting of detailed profiles of the top defense equipment providers in the country. The company profiles also include information about the key products, alliances, recent contract awarded, and financial analysis, wherever available

Key Players

Israel Aerospace Industries (IAI)

The Boeing Co

Raytheon Technologies Corp

Table of Contents

Table of Contents

Executive Summary

Defense Budget Assessment

Budgeting Process

Defense Market Size Historic and Forecast

Drivers Of Defense Expenditure

Analysis Of Defense Budget Allocation

Key Market Trends and Insights

Military Doctrine and Security Environment

Military Doctrine and Strategy

Primary Threat Perception

Political and Strategic Alliances

Geopolitical Social and Economic Scenario

Market Entry Strategy and Regulations

Procurement Policy and Process

Market Regulations

Market Entry Route

Key Challenges

Major Deals and M&A

Market Attractiveness and Emerging Opportunities

Market Attractiveness, 2021-26

Top Defense Segments By Value

Import and Export Market Dynamics

Import Market Dynamics

Export Market Dynamics

Defense Platform Acquisitions

F-35I Adir


CH-53K King Stallion

Hermes 900


Fleet Size

Competitive Landscape

Defense Companies Operating In Israel

Main Defense Companies


About This Report

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Frequently Asked Questions

The defense budget in Israel is valued at $20.7 billion in 2020.

Israel’s defense expenditure is expected to register a CAGR of more than 3% during the forecast period 2021-2026.

In 2020, Israel’s defense budget as a percentage of GDP is 6.6%.

The missiles and missile defense systems sector is the largest sector within Israel’s defense market.

Leading companies in the Israel defense market include General Dynamics, Navistar Defense, Rafael Advanced Defense Systems, Israel Aerospace Industries (IAI).


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