Report Overview

Increasingly sophisticated modern and cyber warfare, intensifying regional military tensions, and surging arms export are expected to boost the growth of Israel Defense Market during the forecast period between 2025 and 2031.

Israel Defense Market - Industry Trends & Forecast Report, 2031

Israel Defense Market size was estimated to be worth USD 31.77 billion in 2024. During the forecast period between 2025 and 2031, Israel Defense Market size is projected to grow at a CAGR of 3.18% reaching a value of USD 39.54 billion by 2031. Major growth factors for Israel Defense Market include intensifying military tensions across its borders, the Middle East, and West Asia, heightened security concerns, significant aid from the United States, and rising military expenditures and exports. On October 07, 2023, Hamas launched a massive surprise attack on Israel and killed more than 1,300 people, injured 3,300, and took hundreds of hostages. On the following day, Israel Defense Forces (IDF) carried out a “complete siege” of Gaza. It is a significant rise in Israel-Hamas war. Consequently, the major increase in budgetary allocation for the military and exports has boosted the growth of Israel Defense Market during 2024–2025. In addition, countries across the regions facing significantly intensifying military are increasingly importing advanced missile and missile defense systems from Israel-based major arms exporters.

Source: BlueWeave Consulting

Defense Market – Overview

Defense refers to a nation's military actions aimed at safeguarding its sovereignty, territorial integrity, and national security by countering aggression, subversive activities, and terrorism. Israel Defense Market is witnessing steady growth due to the rising adoption of integrated defense technologies, which combine multiple systems to enhance security capabilities. Advancements in automation and data analytics are driving modernization efforts, improving operational efficiency. The growing need for a highly adaptable and technologically advanced military is fueling demand for modern defense systems to support evolving security requirements.

Israel Defense Market

Growth Drivers

Increasing Military Threat across Borders and Regions

Intensifying geopolitical tensions across its borders and Middle East and West Asia regions are boosting the growth of Israel Defense Market, with countries increasing their military expenditures to enhance security and strategic capabilities. A key example is China, which recently announced a 7.2% rise in its defense budget for 2025, continuing its efforts to modernize its armed forces amid intensifying competition with the Israel. As the world’s second-largest military spender, China aims to strengthen its defense capabilities. Meanwhile, the further spreading of prolonging Russia-Ukraine war reflects broader security concerns and is contributing to a rise in defense investments. The shift toward larger military budgets is shaping a new defense market cycle, benefiting defense contractors and encouraging advancements in military technology, including advanced missiles, unmanned weapon systems and drones, naval fleets, and aerospace and cyber defense. As geopolitical and military power dynamics shift and conflicts persist, defense spending is set to remain a key priority for many nations, driving the long-term growth in Israel Defense Market.

Challenges

Increasingly High Cost for Modern and Advanced Defense Systems

Rapidly rising costs for development and maintenance of advanced weapons and modern defense systems could significantly restrain the growth of Israel Defense Market. The advanced defense technologies required for modern defense systems, such as next generation aircraft, naval vessels, and cyber defense solutions, demands substantial investments. Additionally, ongoing maintenance and upgrades of existing military assets further strain budgets. These financial burdens could limit the ability of nations to expand or modernize their forces. As a result, high costs could hinder military readiness and slow the adoption of innovative defense technologies, potentially impacting overall growth of Israel Defense Market.

Impact of Escalating Geopolitical Tensions on Israel Defense Market

Escalating geopolitical tensions, particularly prolonging and further spread of the war with Palestine could significantly impact Israel Defense Market by driving increased defense spending as nations prioritize military preparedness. Heightened conflicts and regional instability push countries to enhance their defense capabilities, leading to larger defense budgets and investments in advanced defense technologies. This surge in demand for military equipment, such as aircraft, weapons systems, and cybersecurity solutions, fuels the growth of Israel Defense Market. Additionally, geopolitical uncertainty accelerates arms race dynamics and fosters strategic partnerships, further expanding the defense market. However, it also creates challenges, including rising competition, and the need for rapid innovations to address emerging security threats.

Israel Defense Market

Segmental Coverage

Israel Defense Market – By Armed Forces

Israel Defense Market by armed forces is segmented into Air Force, Army, and Navy segments. The air force segment holds the largest share of Israel Defense Market by armed forces. The modernization of aircraft capabilities with advanced range of missiles in Israel is expected to drive significant growth in the Air Force segment. The army segment, followed by Air Force segment, holds a significant market share in Israel Defense Market by armed forces.

Source: BlueWeave Consulting

Israel Defense Market – By Product Type

On the basis of product type, Israel Defense Market is divided into Missiles and Missiles Defense, Fixed Wing Aircraft, Rotorcraft, Naval Vessels, and Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Systems; Weapons & Ammunition; Protection & Training Equipment; and Unmanned Aerial Vehicles (UAVs) segments. The fixed wing aircraft segment is further divided into fighter jets and transport aircraft. The rotor craft segment consists of helicopters. The ground vehicles segment, on the other hand, included tanks and armored fighting vehicles. The missiles and missiles defense segment, comprising Iron Dome, David’s Sling, and anti-ballistic missiles (The Arrow Family), accounts for the largest share of Israel Defense Market by product type.

Israel Defense Market – By Operation

Based on operation, Israel Defense Market is bifurcated into Autonomous Defense Equipment and Manual segments. Israel, like other major countries across the world, is rapidly adopting unmanned systems, such as unmanned aerial vehicles (UAVs), unmanned combat vehicles, and autonomous drones, for various military applications, such as surveillance, reconnaissance, search and rescue operations, and tactical missions. Unmanned systems are equipped with advanced sensors, 360-degree situational awareness capabilities, and autonomous technologies, enabling them to operate remotely or make autonomous decisions without human intervention. It enhances operational efficiency, reduces risk to personnel, and improves mission outcomes. The surging demand for unmanned systems is also reflected by advancements in commercial and civilian sectors, where drones are used for purposes ranging from agriculture and delivery to infrastructure inspection. As research and innovations in unmanned systems continue to evolve, these technologies offer an expanding array of applications and further fuel the growth of unmanned systems in Israel Defense Market.

Competitive Landscape

Israel Defense Market is highly competitive, as a number of companies are competing to gain a significant market share. Key players in the market include Aeronautics Ltd, Bet Shemesh Engines (BSE), Combatica, Elbit Systems Ltd, Elisra Group, Israel Aerospace Industries (IAI), Israel Shipyards, Israel Weapon Industries (IWI), Kela Technologies, Rafael Advanced Defense Systems, SIGA OT Solutions, Sky Sapience, and Tomer (IMI Systems). To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Recent Developments

• In November 2025 – Israel Ministry of Defense awarded a USD 210-million contract to Elbit Systems Ltd for tank upgrades.

• In September 2025 - Elbit Systems Ltd received a USD 120-million contract to supply its Hermes 900 Unmanned Aerial System (UAS) for long-range maritime surveillance to an international customer.

Scope of the Report

By Armed Forces

• Airforce

• Army

• Naval

By Product Type

• Missiles & Missile Defense

• Fixed Wing Aircraft

  • Fighter Jets

  • Transport Aircraft

• Rotorcraft

  • Helicopters

• Ground Vehicles

  • Tanks

  • Armored Fighting Vehicles

• Naval Vessels

  • Aircraft Carriers

  • Submarines

  • Destroyers

• Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Systems

• Weapons & Ammunition

• Protection & Training Equipment

• Unmanned Aerial Vehicles (UAVs)

By Operation

• Autonomous Defense Equipment

• Manual