Overview
Israel’s defense sector remains among the most dynamic globally, driven by robust national investment, substantial U.S. Foreign Military Financing (FMF), and record-breaking export growth. Israeli national defense spending in 2024 rose sharply to ~$31.5B, driven by the prolonged war in Gaza and broader regional conflicts. This marks a significant increase over previous years, when national (non-FMF) defense spending typically ranged between $21B-$22B per year.
Israel continues to be the largest recipient of U.S. FMF globally. The United States provides Israel $3.3B annually in FMF, and $500M annually for missile defense appropriations. An additional $1 billion was appropriated in 2022 to replenish Israel’s “Iron Dome” Missile Defense System (IDDS). The Israel Security Supplemental Appropriations Act of 2024, provided an additional $4B to Israel for David Sling Weapon System and IDDS replenishment with another $1.2B for Iron Beam procurement. As of April 2025, the United States has 751 active Foreign Military Sales (FMS) cases with Israel that are valued at $39.2 billion.
The Israeli Ministry of Defense (IMOD) spends approximately one third of its annual FMF allocation on Direct Commercial Contracts (DCC) procurements negotiated between IMOD’s Mission to the United States, based in New York City, and United States-owned commercial business entities. Section 23 of the Arms Export Control Act (AECA) provides the authority for Israel and nine other FMF recipients to acquire material and services via DCC channels. The Defense Security Cooperation Agency (DSCA) has oversight responsibility for these procurements and approves the disbursement of FMF funds for DCC procurements. DSCA published the Guidelines for FMF of DCCs (updated in March 2017) to provide concerned parties with necessary procedural guidance.
Israel’s military and commercial cooperation with the U.S. defense industry is robust and includes commercial contracts with major U.S. companies. The Israeli industry sources quality components and sub-systems that can be integrated into Israeli systems, presenting export opportunities to U.S. suppliers. Additionally, Israel’s defense industry partners with local educational institutions, labs, and universities to develop cutting edge technologies. In 2023, New Hampshire-headquartered global arms manufacturer Sig Sauer announced that it has acquired Israel’s leading technology firm General Robotics. According to Sig Sauer, the move will allow the company to leverage General Robotics’ expertise in developing cutting-edge defense technologies.
Israel’s Defense Industry
The country’s defense industry is dominated by three major players: Israel Aerospace Industries (IAI), Rafael Advanced Defense Systems (both parastatals), and Elbit Systems (publicly traded). These companies offer a diverse portfolio of products and services, including space and airborne reconnaissance systems, radar systems, UAVs, avionics and electro-optical systems, munitions, tanks and armored personnel carriers. They produce structural components and parts and operate maintenance, repair and upgrade facilities. All three majors have strong U.S. presence. In addition, there are several hundred small and medium sized enterprises active in the sector. Israeli startups in the defense tech ecosystem are experiencing rapid growth, with key areas of focus including Aircrafts & Avionics, Unmanned Systems, Navigation & Communication, C4I, Earth Observation, Defense Electronics, Combat Equipment & Systems, Security & Surveillance Integration, Simulations & Training, and more.
Israeli defense exports hit a new record in 2024, totaling $15 billion, showing a 13% increase since 2023 ($13.1 billion). Israel’s defense exports have more than doubled over the past 5 years. More than half of the deals were valued at over $100 million. Israel’s arms exports are increasingly driven by demonstrated battlefield performance and shifting security priorities in Europe and the Middle East.
Top export categories (2024):
- Missile, rocket, and air defense systems (48%)
- Vehicles and APCs (9%)
- Satellites and space systems (8%)
- Radar and EW (8%)
- Manned aircraft and avionics (8%)
- Observation and optronics (6%)
- Intelligence, information and cyber systems (4%)
- Ammunition and armaments (3%)
- Weapon stations and launchers (2%)
- C4I and communication systems (2%)
- Drones and UAVs (1%)
- Maritime systems and platforms (1%)
Export destination breakdown – by region (2024):
- Europe: 54%
- Asia-Pacific: 23%
- Abraham Accords countries (UAE, Bahrain, Morocco): 12%
- North America: 9%
- Latin America: 1%
- Africa: 1%
Export challenges remain an issue for Israel which have been exacerbated by some boycotts, long lead times for manufacturing items, manpower shortages, and high demand for components across the globe. Local manufacturers procuring components that will be integrated in systems for export to third countries consider U.S. export controls a challenge. Local industry also benefits from Israel’s offset program, which is administered by the Industrial Cooperation Authority at the Ministry of Economy. Israeli industry has also benefitted historically from an option to convert 25% of U.S. Government FMF from dollars to shekels, which has enabled the IMOD to spend FMF locally. The U.S. military aid program to Israel approved for 2019-2028 gradually eliminates that provision, which means that the IMOD will have to spend the entire amount in buying weapons, systems, and defense equipment solely from U.S. companies. Local industry is concerned about the negative impact the change will have on smaller industry but this will not affect the three largest defense contractors, who already have a presence in the United States.
Israel’s Space Industry
Israel maintains a small but impactful space research program with both scientific and commercial goals. A space cooperation agreement with NASA in 2015 expanded cooperation in civil space activities. While the country’s first lunar mission, Beresheet, resulted in an unsuccessful landing in April 2019, it nonetheless established Israel as the fourth nation to attempt a soft lunar landing. In February 2023, the Israel Space Agency (ISA) announced ULTRASTAT, Israel’s first space telescope mission, with a launch expected in 2027. The Beresheet-2 mission, originally planned for 2025 and designed to deploy two landers and an orbiter, is currently suspended due to funding challenges.
Looking ahead, Israel is deepening its space-based intelligence capabilities with the launch of Ofek 19 in September 2025. Developed by Israel Aerospace Industries (IAI) in collaboration with the Israeli Ministry of Defense, the satellite features advanced electro-optical and radar imaging systems capable of delivering high-resolution surveillance in all weather and lighting conditions. As part of Israel’s growing constellation of reconnaissance satellites, Ofek 19 enhances strategic early warning, situational awareness, and deterrence, reinforcing the country’s status as a growing regional space power.
Leading Sub-sectors
Aircraft and UAV parts, air-control technology, electronic components for land, air and sea platforms, airborne and ground-based engines, electro-mechanical devices, microwave components, and sensors.
Market Entry for U.S. Exporters
Register through the Israeli MOD Mission in NY
U.S. exporters are encouraged to register as Israeli Ministry of Defense vendors, through the MOD mission in New York (https://mission-ny.mod.gov.il/Pages/Vendors.aspx). Registration is permitted to U.S. suppliers, manufacturers, resellers, or distributors incorporated / licensed to do business in the U.S. Additionally, the company must be in business for at least two years; have at least three employees; meet thresholds for previous business; and comply with the DSCA guidelines.
The registration process starts with submitting a completed Vendor Questionnaire online, after which you will be contacted by the vendors supervisor for additional information. The registration process typically takes up to three weeks. Upon completion, you will receive access to the vendor’s portal and gain access to all RFP’s.
Appoint an Israeli Representative
U.S. exporters are strongly advised to appoint a local representative to introduce their products and services to the Israeli military and aerospace & defense industries. Local representatives can also provide business development services and after-sales support. Another advantage of working through a local representative relates to access to local tenders published by the Ministry of Defense, open strictly to Israeli entities (unlike FMF tenders).
Approach the U.S. Commercial Service
For additional information on market opportunities, matchmaking with local partners, or advocacy support – please contact Commercial Specialist Naama Myers Altman at: Naama.Altman@trade.gov.