This story was originally published by Truthout, a fellow member of the Media Against Apartheid & Displacement collaboration.
Over the last two years, Israel has run simultaneous military operations across an expanding array of fronts. Its armed forces have carried out a genocide in the Gaza Strip and expanded military operations across major West Bank urban centers. Cities including Jenin, Tulkarm, Nablus, Hebron, and areas near Jericho have experienced night raids, blockades, killings, demolitions, and forced displacements. Meanwhile, the Israeli military has also maintained tensions along the Lebanese border, and has struck Syria and Yemen. At the same time, the Israeli government has escalated its aggression against Iran, which it frames as “preemptive” defense against a specious nuclear threat. None of this would be possible without a sophisticated international funding system that upholds Israel’s war machine.
With strong U.S. backing, Israel is experiencing the most expensive and turbulent period in its recent history. Even before the confrontation with Iran, Israel’s military spending had already risen by 65 percent, reaching $46.5 billion in 2024 as the genocide in Gaza and clashes with Hezbollah in southern Lebanon continued. This was the steepest rise since the 1967 Six-Day War, with the portion of Israel’s gross domestic product going to military costs reaching 8.8 percent, making it the second highest globally.
The machinery of debt-financed war
In March 2025, the Knesset approved the national budget, giving the Defense Ministry 109.8 billion shekels, equal to $29.9 billion. This is the largest amount ever approved for that purpose in the country’s history. “This is not just a budget” Finance Minister Bezalel Smotrich stated during the parliamentary debate. “It tells the story of hundreds of thousands of IDF fighters and their families. It is the story of border heroes, pioneering settlers, an entire nation going to war to win.”
Military might relies on continuous financial flows. Without them, no war machine could cover its operating costs. To secure these, a transnational financial framework has been built that turns military operations into strategic assets. In this cycle, conflict creates public debt, which is then structured as a financial product and sold to global investors, freeing up fresh funds. Israel has refined this process, converting military debt into appealing investment tools for markets worldwide.
International investment banks connect government liquidity needs with investment chances. They don’t just advise or passively invest; they also guarantee bond issues that fund the country’s military spending. Since the start of Israel’s genocide in Gaza in October 2023, Israel has issued many government bonds, which many call “war bonds,” gathering at least $19.4 billion between October 2023 and January 2025.
“These bonds are used to fund genocide. Those who buy them are becoming complicit in crimes against humanity and war crimes committed by Israel.”
Shir Hever, coordinator for the Boycott, Divest, and Sanctions (BDS) movement’s military embargo campaign, clarifies that “the bonds the country is selling aren’t exactly ‘war bonds,’ though they’re used to fund genocide. This nation is in a constant state of war, an emergency condition to justify illegal acts, but for many decades it stopped officially calling its bonds ‘war bonds’ due to the bad press they got in the 1980s, when the war was the unpopular 1982 invasion of Lebanon.”
Hever continues, “Israel faces a growing military embargo. Companies are hesitant to trade arms with a state that violates international law, fearing potential repercussions.” Among the first notable examples, Spain halted all new military supplies to Israel starting in November 2023. From May 2024, it banned transit through Spanish ports for ships carrying weapons bound for Israel. More recently, at the Emergency Ministerial Conference on Palestine organized by The Hague Group held July 15 and 16 in Bogotá, Colombia, 12 of 30 participating countries immediately committed to imposing an arms embargo on Israel to stop its attacks in Gaza. These nations include Cuba, Bolivia, Colombia, and South Africa. The remaining countries are scheduled to join them by September 20, 2025, the date of the 80th United Nations General Assembly.
“As a result, Tel Aviv is desperately seeking alternative sources for arms,” Hever says. “It’s also commissioning its own companies to set up national production lines to make weapons they can no longer import. The cost of these initiatives is huge, and it’s funding them by borrowing more, selling bonds worldwide to quickly raise money to fund the Gaza genocide.”
“Since the bonds are needed to equip the armed forces, those who subscribe to them and those who buy them are becoming complicit in crimes against humanity and war crimes committed by Israel,” Hever says.
International institutions are increasingly focusing on this issue. The International Court of Justice and the International Criminal Court have received appeals and formal complaints. These are calling for broadening accountability to include third parties such as financial backers and economic actors who enable or support such crimes.
Hever emphasized, “Every actor has an obligation, under international law, to exercise due diligence and ensure their financial activities don’t contribute to these grave crimes.”
The global banks and investors fueling Israel’s assault
Bonds are financial tools states use to raise funds from markets. Those who buy them lend money to the government, which promises to repay the amount and pay regular interest. To get these bonds onto global markets and ensure they’re bought, Israel has relied on seven major investment banks acting as “underwriters.” These banks buy the bonds from the government, package them as financial products, and resell them to international investors, giving the issuing state immediate cash. Goldman Sachs stands out as the main backer, having underwritten over $7 billion of these bonds (37 percent of the total). The other banks involved are Bank of America, Deutsche Bank, BNP Paribas, Citi, Barclays, and JPMorgan Chase, which together covered the remaining $12.4 billion.
These banks play a key role in issuing bonds while facing pressure from BDS campaigns and international groups that are urging pension funds, universities, and institutional investors to divest. Critics charge that by raising capital for Israel’s government, these institutions enable activities that violate international law. Leading campaigns like “Don’t Buy Into Occupation” and “Stop Arming Israel” identify these financial institutions as partners to Israeli authorities and call for severed ties.
Israeli bonds are bought by a wide range of entities, including pension funds, insurance companies, banks, local governments, and private investors in more than 30 countries. Demand for these financial instruments often outstrips supply by a factor of five because global investors have historically viewed Israeli bonds as relatively safe investments. For example, in the first issuance of 2025, Israel raised $5 billion, while requests for the bonds reached $23 billion. In another record issuance, the government got $8 billion from requests totaling $38 billion.
The framework operates through entities such as Israel Bonds, which maintains ties to Israel’s Finance Ministry. These organizations actively market these securities as vehicles to back Israel’s military efforts, targeting both institutional and private investors across North America and Europe. “Oct. 7 changed everything,” says Dani Naveh, president and CEO of Israel Bonds, referring to the growth in the popularity of these bonds. “But what followed was truly remarkable.” Naveh portrayed these investments as a vote of confidence in Israel’s economy, but they ultimately reveal complicity. The war turned international support into a direct means to continue the slaughter in Gaza.
This method is not new. In the United States, after September 11, the federal government paid for armed response and internal safety by selling many Treasury bonds. Public debt rose quickly, with Treasury bonds bought by millions of investors. In this way, the U.S. covered military costs without raising taxes. This created a cycle where war leads to debt, and debt becomes money tools, sold to investors, bringing in new money.
In later years, during the wars in Iraq and Afghanistan, federal bonds became the main way to fund military action. U.S. Treasury bonds, seen as among the safest investments globally, kept stable demand even during times of political trouble. Because they could attract money, the United States could pay for wide-ranging military operations without immediate budget problems, but with a lasting effect on national debt.
Israel, however, funds its military work not only with debt bonds but also with money from European Union (EU) research programs. The state, though not an EU member, has a special arrangement that allows it to access European funds. This includes programs like Horizon Europe and the European Defence Fund (EDF).
Horizon Europe is officially for civilian research, but many of the technologies it funds have military uses. Between 2021 and 2024, Israel received over 1.1 billion euros from the program, involving 921 projects. Among the beneficiaries are companies like Israel Aerospace Industries, Rafael Advanced Defense Systems, and Elbit Systems, which make weapons. So, European funds support projects in cyber defense, robotics, and satellite communication. These same technologies are then put into Israeli military systems, used for attack drones and surveillance platforms.
Horizon Europe shows the dual civilian and military use of research. The EDF directly pays for military projects with over 7 billion euros between 2021 and 2027. Israel formally could not get access, but in 2023 Israel Aerospace Industries got around this by buying 94.5 percent of the Greek company Intracom Defense. Now Intracom takes part in 15 EDF projects on anti-drone systems, war sensors, encrypted networks, and military AI. Although based in Greece, the technologies developed directly supply the Israeli military machine.
The military push in Gaza caused serious outcomes for Israel’s economy. It is hit hard with rising war costs and political unease. Top rating agencies such as Moody’s, Fitch Ratings, and S&P Global made history by cutting Israel’s sovereign rating, worried about growing debt burdens and economic prospects. Moody’s expressed particular concern, pointing to a possible further downgrade into the speculative category commonly called “junk.” This classification means bonds carry a high chance of not being paid back, falling below safe investment levels.
Mounting backlash and divestment campaigns
At the same time, the global BDS campaign gained speed around the world. Student groups, civil society organizations, and activists launched efforts at well-known universities and major financial centers. They urged asset managers, pension funds, and public bodies to slowly cut investments in Israeli holdings. The legal and reputational harm tied to these investments is becoming clearer. Norway’s sovereign wealth fund sold stakes in Israeli companies operating in settlements over the past year, citing possible breaches of international humanitarian law. Meanwhile, leading financial firms like Storebrand face growing pressure to cut ties with technology companies linked to Israel’s military apparatus. Several major institutional investors have also announced public reviews of their Israeli bond holdings, responding both to awareness campaigns and evolving legal risk assessments.
Every bullet depends on a global funding system. Behind each bomb is an investment flow. Behind each raid, a market push.
The pursuit of weaponry and public funds for national security has profoundly reshaped Israel’s economy. The vast cost of its military operations is reflected in the historic rise in its defense spending, its growing deficit, and its worsening debt. The dramatic need for military funding has also shifted government priorities, reducing money for health, social welfare, education, and infrastructure. Israel’s structural reliance on new debt issuance and global market involvement, in an increasingly unstable world with declining international ratings, shows how deeply Israel’s economy has become tied to the cycles of war and global finance.
Israeli military might is deeply linked with its economy. Every bullet depends on a global funding system. Markets react, banks manage the flow and investors speculate. While focus stays on the military, few look at its economic backing. The country turns conflicts into profit and war into stock data. Israel’s true strength comes not just from armies, but from its ability to move capital with every new conflict. Israel’s constantly expanding assault on Palestinians and the broader region will not end until these profit flows are severed. Behind each bomb is an investment flow, behind each raid a market push, behind each alliance an insurance policy against the world’s fragility.
