Can Israel's war economy survive its growing global isolation?

AI Summary

Israel's economy is under strain due to its reliance on US aid and European trade, amidst growing global isolation and calls for reduced support. The country's shift towards a security-first industrial model is raising concerns about long-term sustainability, as public opinion in the West begins to turn against its military actions in Gaza and elsewhere.

Can Israel's war economy survive its growing global isolation? Antony Loewenstein on Fri, 05/01/2026 - 20:45 Dependent on US aid, European trade and Zionist lobbying, Israel faces growing strain as public opinion shifts and pressure mounts in the US and Europe to cut support Pro-Palestinian protesters display a banner outside a BAE Systems facility in Rochester, England, calling on the British government to impose a full arms embargo on Israel, 8 October 2025 (Ben Stansall/AFP) On Can a nation remain on a permanent war footing and survive, even thrive? Israel is trying to find out. Although it has been in various conflicts with its Arab neighbours since 1948, the Netanyahu government has ramped up endless wars of occupation in Gaza and the West Bank, unleashed violence against Iran and Lebanon, and targeted Yemen and Syria. It is a recipe for both a bloated budget and moral degradation, with military spending nearly doubling as a share of GDP at the expense of civilian sectors, tourism and foreign investment. UN Special Rapporteur Francesca Albanese has described this development as an economy of genocide. The Jerusalem Report recently confirmed this transformation: "The transition from a consumer-led, peaceful growth model to a security-first industrial complex is complete, and the long-term prosperity of the state now depends on its ability to innovate within this new, more expensive reality." (adsbygoogle = window.adsbygoogle || []).push({}); "Security-first" is a polite phrase for Israel's "Super Sparta War Economy", which relies on a never-ending supply of manpower, surveillance tech, AI weaponry and foreign capital. Israel and its backers claim that these conflicts are the inevitable result of Arab rejectionism in the Middle East, never acknowledging that Israel and Zionism have always needed expansionism and conquest to remain relevant. A state cannot reasonably expect peace when it occupies and bombs other lands for more than half a century A state cannot reasonably expect peace when it occupies and bombs other lands for more than half a century. Thus far, in its nearly 80-year history, Israel has depended on a combination of US aid and weapons, European indulgence and arms, and a powerful Zionist lobbying campaign in the US that has ensured a seemingly endless amount of indulgence and financial backing. But is this potentially coming to an end, or at least being curtailed? The signs are there of an important shift in both US and European policy in the near future, due in part to millions of Americans and Europeans shocked by the scale of Israel's genocide in Gaza and rampant illegality across the Middle East. It is difficult for Israel to continue business as usual, simply investing more money in propaganda campaigns and attempting to manipulate AI systems. It is spending close to $1bn in attempts to improve the global image of its policies. Yet public opinion in the West towards Israel has collapsed in the last two years, and those citizens are unlikely to become pro-Israel supporters ever again. Political and economic pressure What would this economic and political shift look like? In the US, there is a growing political appetite, especially in parts of the Democratic Party, to stop sending weapons to Israel, even if it wants to buy them. As recently reported by the US outlet Zeteo: The high mark of support to block arms transfers to Israel underscores how drastically public support for Israel has cratered, particularly among rank-and-file Democrats, but also among independents and even some Republicans. With that collapse, public pressure is at an all-time high for Congress to follow the law and stop using US tax dollars to aid Israel's violence. Although there has yet to be much tangible political action against Israel in the US Congress, it is conceivable that it could happen in the coming years. Israel is about to commence negotiations with the US to cease military support by 2038. (adsbygoogle = window.adsbygoogle || []).push({}); Of course, none of this is any comfort to the Palestinians, Lebanese and Iranians who continue to suffer so grievously under Israeli bombs. Follow Middle East Eye's live coverage of Israel's genocide in Gaza In Europe, the picture is equally constipated. There is certainly growing pressure from European parliamentarians to boycott or sanction Israel, but little interest from the EU hierarchy in Brussels to impact its close ties with Israel. Israel is vulnerable to economic pressure if its biggest trading partner, the EU, were to put actions behind its endless statements of concern about Israeli policy, violence, settlements and racism. Arguably, the only way that any state's actions are tamed is when it feels true economic pain. (adsbygoogle = window.adsbygoogle || []).push({}); A serious global challenge Israel has never faced a more serious global challenge to its legitimacy. In many nations,