Here’s a grim reality: if you had invested in the Israeli stock index on October 7, 2023 — the day of Hamas’ deadly attack on Israel — you would now be enjoying the best financial return of any major equity market in the world. Since then, as Israel has systematically flattened Gaza in a devastating campaign that has killed tens of thousands — if not hundreds of thousands — of civilians and displaced millions, openly committing gross human rights violations in the process, the Tel Aviv Stock Exchange has soared. By July 2025 the index was up almost 80% in dollar terms, buoyed by both domestic retail investors and foreign capital.
Yet this is not an anomaly — it is a feature of the system. As UN Special Rapporteur Francesca Albanese outlines in her brave report “From Economy of Occupation to Economy of Genocide”, Israel’s economy is not just surviving amid conflict — it is thriving because of it.
The rampage unleashed by Netanyahu’s government has been good for business in Israel. The occupation of Palestinian territory is deeply interwoven with corporate interests. Illegal settlements fuel a real estate boom. Military technologies developed through decades of occupation and surveillance are exported globally. Profits are being made from the devastation of Gaza. Those same ruins now promise lucrative reconstruction contracts, once the forced removal of Palestinians is complete.
Meanwhile, little appears in the mainstream financial media critical of this brutal Military/Tech/Industrial complex. Instead, commentators like Ruchir Sharma in the Financial Times marvel at its “economic miracle”, and firmly state that Israel is “winning”, while pointing out its scale of research and development spending and rate of productivity growth.
On such metrics, of course, they are right. Israel ranks third for companies in the field of generative AI. Its productivity growth outpaces most other developed economies. GDP per capita has tripled since 2000, surpassing $55,000 (about R956,000) — more than Germany and approaching that of the US.
But there are two problems with this reading. First, stock markets are never gauges of justice or legitimacy; they are short-term estimates of future profit streams, regardless of what odious activities occur or the context from which those may be generated. The TA-125 index is small, concentrated and heavily skewed to bank, insurance and finance stocks that have benefited from wartime interest rates and a hot domestic tech economy. Other large components are tech AI company Nova, as well as the now infamous Elbit Systems, which manufactures the attack drones, tanks and bulldozers that have flattened Gaza.
Narrow bull market
It looks like a narrow bull market, and not a more sustainable grind ever higher. The Tel Aviv outperformance may well not last. Israel’s bond markets are already flashing warning signs. Credit rating agencies Moody’s, S&P and Fitch downgraded its credit rating in 2024, and all have the sovereign on negative outlooks.
But there is a second, and more fundamental issue with this reading that a strong stock market and resilient economy in some way means that Israel is “winning”. As Albanese points out, Israeli economic statistics cannot be seen independently of the violence that underpins them. The same state that supports world-leading tech innovation is also engaged in systematic and unrelenting human rights abuses, from collective punishment in Gaza to apartheid in the West Bank. The same government celebrating a record number of initial public offerings is also facing allegations of genocide at the International Court of Justice. Israel’s economic success story is not despite its militaristic belligerence. It is, in many cases, because of it.
These contradictions play out, on a structural level, across the country’s riven political economy. Israel today is not simply a divided society — it is increasingly an incoherent, socially unsustainable one. Five elections between 2018 and 2022 have failed to resolve deep tensions between dwindling numbers of largely tech sector secular liberals, ultra-Orthodox Jews who refuse to participate in military service, Zionist nationalists of the ilk of Netanyahu, and systemically marginalised Arabs.
The mainstream of Israeli political consensus has therefore moved sharply towards the extreme right. Polls now show that a growing majority of Israeli Jews oppose the formation of a Palestinian state and support the expulsion of Palestinians altogether, both from occupied territories in the West Bank and Gaza, and the deportation of Arab-Israeli citizens. This is not a fringe view, it is increasingly the political centre.
For decades the idea of a two-state solution served as a way of resolving the contradiction of a supposedly law-abiding democracy committing illiberal, illegal acts. It was a kind of diplomatic placeholder; while never realised, the illusion at least maintained hope and a semblance of legitimacy. That fantasy has evaporated. The West Bank has been Balkanised and largely annexed through settlements. Gaza has been levelled. Mass starvation has been inflicted; food and humanitarian aid have been instrumentalised as weapons of war. The dream of peaceful cohabitation has been buried beneath bulldozed homes and schools, and the growing sense that Jewish sovereignty is equivalent to Palestinian erasure.
No return to the ‘old’ Israel
Many in the international community lay the blame squarely on Benjamin Netanyahu. But like Trump in the US, Netanyahu is not the root of the problem. He is a product of the system. He reflects, rather than drives, the will of a large segment of Israeli society. His eventual departure, whenever that may be, will not reverse the current trajectory. There will be no return to the “old” Israel that liberals nostalgically evoke. That there is widespread anger at Netanyahu in Israel is true. That those angry at Netanyahu want his successor to seek a Palestinian state, or even Palestinian rights, is false.
What does the future Israel look like? How will Israel’s future be affected by its genocidal actions and the inevitable demolition of its incontestable morality, derived from its birth in the ashes of the Holocaust? Israel’s founding promise was born out of unimaginable trauma. For much of the international community, especially those Europeans living in the shadow of a genocide, the state was a moral necessity. But that moral obligation cannot exist alongside the permanent subjugation and expulsion of other people. Israel cannot be both a rogue Jewish supremacist oppressor and a democracy. Its political leadership and citizenry must choose which one it will be.
One potentially viable future is where land is shared, in some way — either through two states, one state, or a type of confederation — and in which equal rights are guaranteed for all who live between the Jordan river and the Mediterranean. But that future is not currently on offer, and there is little pressure — either domestically or internationally — to force the issue.
Absent that, Israel will drift toward a full-fledged apartheid state, increasingly authoritarian at home and in the Middle East, and increasingly isolated abroad. That the markets are still bullish, and the economy resilient, should not give us cause to reassess. History is full of states, like apartheid South Africa, that prospered economically while being corrupted morally. None endured indefinitely. DM