Israel’s market is relatively small and mature across many sectors, leading to strong local and international competition for U.S. companies. Due to Israel’s strong commercial ties with Europe, some industries have adopted European Union (EU) technical standards over U.S.-standards, creating challenges for both established and new-to-market American firms. Israel passes legislation in 2024 entitled “What’s Good for Europe is Good for Israel”, aimed at aligning Israeli import standards with those of Europe, reducing import barriers, increasing competition, and streamlining trade processes.
While the measures, most of which went into effect January 1, 2025, are potentially trade facilitative for U.S. companies that already export regularly to the EU, there are concerns that this reform will incentivize Israeli importers to purchase products that are first-party-certified to European regulations and mandatory standards or are otherwise already marketed in Europe. U.S. companies who feel these regulations may wrongfully disadvantage their firm from selling to Israel should contact the U.S. Commercial Service. The Israeli government announced in March 2025 that Israel would work to pass legislation to similarly fast-track import of products certified to American standards.
While there are substantial opportunities in large infrastructure projects across multiple sectors, many of these projects often rely on a public-private partnership (PPP) financing model. For U.S. small and medium-sized enterprises (SMEs), securing the necessary initial capital can be a challenge. U.S. companies successful in competing on Israeli infrastructure projects tend to have local partners.
U.S. Export Control regulations for re-exports of controlled items are perceived as a challenge by Israeli manufacturers. The business environment will seem familiar to Americans, though dress may seem more informal and personal relationships play a greater role.
Israel-Hamas Conflict
On October 7, 2023, the terrorist organization Hamas launched an attack on Israel, prompting the Israeli government to declare war against Hamas. A ceasefire between Israel and Hamas has been in effect since October 13, 2025. The war with Hamas and subsequent rocket attacks from Hizballah along Israel’s northern border with Lebanon resulted in the evacuation and displacement of over 200,000 Israeli civilians from their homes in northern and southern Israel.
The multifront war disrupted the vibrant $540 billion Israeli economy, pushing GDP growth for 2024 down to only one percent compared to pre-war estimates of 4-5 percent. Labor shortages due to the callup of reservists and the barring of 150,000 Palestinian workers from jobs they held in Israel before October 7th constrain the economy. Increased war-related spending created significant budget deficits, triggering credit downgrades in 2024, though Israel’s debt remains investment grade. Economic activity briefly contracted due to the June 2025 conflict with Iran, but growth forecasts for 2025 as a whole average 2.7 percent and 4.4 percent for 2026. During much of the conflict, U.S. airline carriers periodically suspended flight routes to Israel, though many have since resumed flights and others have announced plans to resume service in summer-autumn 2025. While the market was impacted by the war, business operations, particularly in business hub cities like Tel Aviv and Jerusalem, have largely returned to normal.