The Israeli economy in general, and its high-tech industry in particular, have been demonstrating amazing levels of resilience, innovation, and daring during Israel’s prolonged war against Hamas and its June 2025 war against Iran, astounding global markets. Notwithstanding the threats from various fronts, Israeli companies, which have become adept at maintaining “wartime routine”, are reporting increases in investments, growing interest in Israeli technologies, and burgeoning prosperity in the civil and defense innovation sectors.
The State of Israel has been in a constant state of emergency since its founding. It is only fitting that the local high-tech market rise to the occasion and adapt to operating in wartime mode. Indeed, after 21 months of battle, including the intense 12-day war against Iran, Israel’s high-tech sector is demonstrating impressive achievements.
Israel’s cybersecurity sector (which recorded peak investments during the Covid-19 crisis in 2020) and artificial intelligence sector were highly prominent in the international markets during the first half of 2025. During the first quarter of 2025 alone, the Israeli cyber sector closed about 25 transactions, its prominence highlighted especially by Google’s acquisition of the Wiz. Israel’s defense sector also recorded an increase in transactions during the second quarter of 2025.
Another impressive achievement of the Israeli high tech was recorded in “mega” transactions. During the second quarter of 2025 (which overlapped with Israel’s 12-day war against Iran), Israeli high-tech companies closed 17 investment rounds, each at a value exceeding USD 50 million. These are the highest investment figures the country’s seen since the third quarter of 2022.
There is also room for optimism among investors sentiment. The period since October 7, 2023, has been characterized by relative caution on the part of investors, reflected by their preference for follow-on investments over initial investments. During the second quarter of 2025, the market witnessed a shift in investor sentiments, with increases in both the number of initial investments and in the number of first-time investors. Nevertheless, it is evident that venture capital funds still prefer to invest in companies already in their portfolios, rather than to take on new risks (largely echoing their behavior in 2020, upon the outbreak of Covid-19).
Additionally, during the second quarter of 2025 two Israeli companies completed their IPOs , compared to zero IPOs during the first quarter of 2025. Compared to the IPO figures of 2024, this is a lower number – however, the valuation of the companies, particularly eToro, increased significantly. The cautious optimism and underlying confidence that have characterized the local market even during wartime routine were especially evident during the 12 days of direct confrontation between Israel and Iran. In real time, during the conflict, the TA-125 index surged by approximately 8%, with Elbit Systems’ stock standing out as a top performer.
There are several factors behind these trends, and it always starts with human capital. About 20% of the reservists called up for military duty during the war work in the Israeli high-tech sector. Their combination of civilian expertise with military experience and familiarity with the battlefield serves as a powerful catalyst for the growth and success of Israel’s defense sector. And the ground is fertile: both the United States and the local market continue to express strong confidence in Israel’s defense sector. Now, considering NATO’s new security arrangements, the ongoing Russia-Ukraine war, and rising defense budgets, European countries too are setting their sights on Israeli developments.
The 12-day war between Israel and Iran also constituted a kind of Proof of Concept (on steroids, if you will) of Israeli technological, cybersecurity, defense, and intelligence capabilities. The IDF’s impressive performance, led by the Air Force, r Defense and Cyber units, demonstrated, in practice, the superior quality capabilities of Israel’s high-tech industry and earned investors’ utmost confidence in the excellence of Israeli high-tech in general and its defense industry in particular.
Finally, it appears the global market is interpreting the outcome of Israel’s war against Iran as elimination (or at least reduction) of the security threat against Israel. As a result, Israeli is once again being perceived as stable, secure, at the vanguard of technology, and very attractive to international investors.
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Adv. Tal Freilich Hai has extensive experience representing key players in the Israeli high-tech sector, including technology companies and venture capital firms.