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THE NEW ERA OF ISRAELI EXPANSIONISM AND THE WAR ECONOMY THAT FUELS IT
 
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Ahmed Alqarout
February 2, 2026
Mondoweiss
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_ How Israel’s war-driven economy, regional realignments, and
Netanyahu’s push for military independence are ushering in a new
period of Israeli expansionism in its quest for regional dominance. _

An Israeli artillery unit carries out a military drill at the
crossroads between Lebanon, Syria, and Israel on August 28, 2023, ©
Atef Safadi/EFE via ZUMA Press/APA images

 

Israel has entered a new era of territorial expansionism and military
aggression beyond the borders of historic Palestine. Its belligerent
actions have accelerated across Jordan, Lebanon, Syria, Yemen, Iran,
Qatar, Libya, and most recently, Somaliland. These developments
aren’t due to a change in Israeli strategic ambitions, but rather to
the loosening of constraints that had kept it bounded before October
2023.

This expansionist turn reflects a structural recalibration of risk,
leverage, and international tolerance rather than a sudden ideological
shift. But it is also due to the way Israel’s economy is now
structured: the military industry has been carrying the economy ever
since Israel experienced a level of global isolation that decimated
most other sectors
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past two years. The result? Israel now has an additional structural
incentive to be in a perpetual state of war.

Prime Minister Benjamin Netanyahu gave voice to this reality when he
announced that Israel would need to become a “super Sparta
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— a highly militarized warrior state with a self-sufficient military
industry, capable of defying international pressure and arms embargoes
because it no longer has to rely on American military beneficence.

A crucial recent strategic declaration sharpens this trajectory. In
January 2026, Prime Minister Benjamin Netanyahu announced his
intention to end U.S. military aid to Israel
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within roughly a decade, framing this as a path toward
military-industrial self-sufficiency and strategic autarky
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This announcement signals that Israel is no longer content to remain
subordinate to the U.S., instead seeking to operate as its strategic
partner in the region at a time when the U.S.’s national security
strategy is shifting attention from the Middle East to the Western
Hemisphere.

Netanyahu’s declaration amplifies the urgency of the export-led
growth model, which is largely based on the arms industry. The problem
is, if Israel is to replace $3.8 billion in annual U.S. military aid,
it must dramatically scale up its domestic production and export
capacity. 

The Israeli state is attempting to institutionalize this export surge
through policy, committing roughly NIS 350 billion (equivalent to
$100–108 billion) over the coming decade to expand an independent
domestic arms industry. Economically, this means that military
production will become central to Israel’s long-term industrial
strategy, diverting capital, labor, and state support toward weapons
manufacturing rather than civilian recovery, a strategy that is
untenable during wartime. This also embeds Israeli firms deeper into
global security supply chains, even as the state itself becomes
diplomatically isolated.

THE STRUCTURAL DIMENSION: INCENTIVE FOR PERMANENT WAR

Since 2023, Israeli military exports have become one of the few
sectors compensating for its broader economic slowdown. In 2023,
defense exports reached approximately $13 billion, and in 2024 they
climbed further to around $14.7–15 billion, setting successive
records. This expansion took place while civilian economic growth
weakened, labor shortages and unemployment intensified due to the
prolonged mobilization of the army, and large segments of the small
and medium enterprise sector reported sustained losses and
bankruptcies. Arms exports essentially functioned as a countercyclical
stabilizer during wartime stress, but now they’re becoming a
permanent part of how the Israeli economy aims to reproduce itself.

In 2025, this trajectory accelerated even further. Israel signed some
of its largest defense agreements to date with the U.S., UAE, Germany,
Greece, and Azerbaijan, covering air defense systems, missiles,
drones, and advanced surveillance technologies. While full contract
values are not always disclosed, these deals are expected to push
total defense exports beyond the 2024 record, reinforcing the arms
sector as Israel’s most dynamic export industry, even as other
exports, such as agriculture
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an imminent “collapse,” according to Israeli farmers.

As civilian sectors stagnate, the war economy provides growth, foreign
currency earnings, and political insulation. This creates a structural
incentive for permanent mobilization: war sustains demand, shields the
government from accountability, and reinforces a worldview in which
force is treated as the primary currency of international relations. 

In this configuration, military aggression and territorial
expansionism are the mechanisms through which the Israeli economy now
seeks to reproduce itself. As a result, Israel’s governing coalition
rests on permanent securitization. The war economy has become the
organizing principle of political survival and regime insurance.

THE GLOBAL DIMENSION: THE END OF INTERNATIONAL LAW

The international dimension is equally decisive. Israel’s
territorial expansionism and military aggression have been enabled by
the hollowing out of global constraint mechanisms
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such as international law.

Western states have demonstrated that there is no meaningful red line
when violence is framed as counterterrorism or civilizational defense.
Legal norms remain rhetorically intact but operationally suspended.
This has altered Israel’s strategic calculus, because if Gaza
produces diplomatic noise but no material sanctions, then Lebanon,
Syria, or Iraq carries even lower expected costs.

THE COLLAPSE OF NORMALIZATION: NO REASON TO PLAY NICE

Normalization politics also play a role. The collapse of Israeli-Saudi
normalization talks — which had accelerated throughout 2023
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under U.S. mediation but stalled
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after Israel launched its genocide in Gaza — did not discipline
Israeli behavior, but liberated it. 

Without Saudi recognition serving as a bargaining chip or incentive
for restraint, Israel abandoned any pretense of using territorial
compromises as a negotiating tool. It doubled down on the objective of
establishing facts on the ground while seeking bilateral security ties
with smaller or more vulnerable actors. Expansion now substitutes for
Israel’s dying soft power, and recognition is increasingly extracted
through leverage rather than negotiation. 

What makes the post-2023 moment distinctive is Israel fighting across
multiple theaters simultaneously, in the open, and with confidence
that escalation will not trigger systemic pushback. Furthermore,
Israel’s strategy has become structurally enabled by an
ever-increasing reliance on new technologies developed during war. It
is no longer a response to threats but a method of governance at home
and influence abroad.

Since 2023, Israel has no longer pursued peace through containment, as
it did during the Arab Spring period. Instead, it has shifted toward
permanent occupation, land seizure, and the redrawing of political
maps to sustain and expand its war machine. 

HOW ISRAEL IS PURSUING REGIONAL DOMINANCE

Domestically, Israeli territorial expansionism aims to permanently
resolve the Palestinian question through a combination of expulsion,
cantonization, co-optation, and ultimately displacement. The
underlying logic is to eliminate what is perceived as Israel’s
primary domestic security problem — the very presence of the
Palestinian people on their land — once and for all, thereby
restoring elite and societal confidence in the long-term survival of
the state.

At the regional level, Israel pursues diverse objectives across the
countries in which it intervenes, some involving territorial
acquisition or semi-permanent occupation, others focused on
subordination, fragmentation, and neutralization of perceived threats.

In Iran, aggression takes the form of seeking regime destabilization
and military degradation through sustained airstrikes on nuclear and
military facilities, alongside efforts to exacerbate social and
political unrest. The June 2025 war between Israel and Iran marked the
most direct military confrontation between the two states to date, yet
it terminated in an informal pause rather than escalating into
full-scale war, with neither side crossing recognized deterrence
thresholds despite the intensity of exchanges. 

[Israeli rescue teams operate at the scene of an Iranian missile
strike on a residential area in Bir al-Sabe (Beersheba), June 24,
2025. (Photo: Saeed Qaq/ZUMA Press Wire/APA Images)]Israeli rescue
teams operate at the scene of an Iranian missile strike on a
residential area in Bir al-Sabe (Beersheba), June 24, 2025. (Photo:
Saeed Qaq/ZUMA Press Wire/APA Images)

Since then, large-scale protests inside Iran have introduced a new
internal pressure point that external actors increasingly frame as a
strategic vulnerability. This has coincided with explicit threats of
war from Donald Trump and renewed U.S. military signalling, which
together reinforce Israel’s long-standing view of Iran as an
existential threat to be confronted through regime change. Yet the
persistence of non-escalation reflects how aggression against Iran
operates within implicit boundaries that territorial expansionism in
Palestine or Syria does not face, even as the fusion of internal
unrest and external coercive rhetoric makes this equilibrium more
fragile.

In Lebanon, Israel seeks to dismantle Hezbollah not only as a military
actor but as the backbone of a Shiite-led political order that
obstructs Israeli regional dominance. The deeper objective is to
fracture Lebanon into a minorities-based system in which Druze,
Christians, and other groups are incentivized to seek external
protection and economic linkage with Israel. A weak and segmented
Lebanon provides strategic depth without the costs and liabilities of
direct occupation. For now, the cross-border escalation in Lebanon
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functions less as a pathway to outright military victory and more as a
tool for reshaping Lebanon’s internal political balance over time.

As of January 2026, despite the ceasefire nominally holding, Israel
has maintained “temporary” positions in five “strategic”
locations in southern Lebanon, refusing to complete its withdrawal.
The result is a tense stalemate in which Israel maintains military
leverage over Lebanon while withholding its commitment to a full
withdrawal and leaving open the possibility of renewed major
escalations. 

Israel’s strikes across Syria are somewhat more complex, becoming a
central theater of Israeli military intervention and engineered
political fragmentation following the fall of the Assad regime in
December 2024. The Israeli strategy in Syria
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involves both direct military action and efforts to prevent unified
Syrian state consolidation by providing military support for and
coordination with Syrian Kurdish forces (the SDF) aimed at fragmenting
the new Syrian government’s authority.

In March 2025, Israeli Defense Minister Israel Katz publicly announced
that Israel would permit Syrian Druze workers to enter the Golan
Heights for agricultural and construction work, framing this as a
humanitarian gesture while simultaneously cultivating labour
dependencies and economic ties that bind border communities to Israel.
In July 2025, Netanyahu adopted
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“demilitarization of southern Syria,” declaring that Israeli
forces would remain in southern Syria indefinitely and that no Syrian
military forces would be permitted south of Damascus, effectively
partitioning Syrian territory. Netanyahu framed this policy as
“protection of the Druze.” 

ISRAEL’S SETBACKS IN SYRIA

By late 2025 and early 2026, the SDF’s position had collapsed. Arab
tribal defections in Raqqa and Deir Ez-Zour, mounting pressure from
Turkish forces to the north, and a lack of sustained external support
led to a rapid SDF retreat from much of northern and eastern Syria by
January 2026. This collapse of Israel’s primary Kurdish proxy,
coupled with the failure of Israeli-backed Druze militia resistance to
prevent Damascus’s consolidation of authority in southern Syria, has
undermined Israel’s strategy of preventing unified Syrian state
reconstruction through proxy warfare. 

The Druze and Alawite populations represent potential economic and
demographic assets at a time when Israel faces a structural shortage
of both soldiers and workers. Since 2023, this shortage has become
acute. The Syrian periphery offers a pool of labor that can be
selectively incorporated under autonomy arrangements or informal
annexation, which Israel has already done
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Syrian Druze to work in the Golan Heights. What is emerging is a
strategy of economic annexation without formal borders, integrating
the southern Syrian periphery into the Israeli economy on subordinate
terms.

As for Yemen, its alignment with Gaza and its demonstrated capacity to
disrupt Red Sea shipping have elevated it from a peripheral conflict
to a strategic threat for Israel, especially since Ansar Allah’s
blockade undermines Israel’s global trade architecture and its
security relationships with Western shipping insurers, logistics
firms, and port operators. Yemen’s growing ties with Russia and
China have only compounded this threat. That’s why attacking Yemen
isn’t about Yemen alone, but about preserving a Western-aligned
maritime order in which Israel is embedded as its key security node.

FORGING CLIENT STATES

This is where Israel’s recognition of Somaliland
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comes in, allowing Israel to bypass internationally recognized states
and to work directly with sub-state entities. Somaliland has allegedly
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military base established in the territory and to accept displaced
Palestinians from Gaza in exchange for this recognition.

Regarding direct Israeli involvement in North Africa more broadly,
Israel has not pursued direct military operations in Egypt or
sustained military intervention in Sudan or Libya, but it has pursued
indirect strategies of influence and intelligence gathering, from
maintaining contacts with both sides of the Sudanese civil war to
secretly meeting with Libyan officials before October 2023.

The costs of EXPANSIONISM AND POTENTIAL FOR RESISTANCE

While Israel’s current trajectory is being framed domestically as a
triumph, its long-term outlook remains grim and costly. Permanent war
locks Israel into permanent military mobilization, accelerates
demographic and moral exhaustion, and increases long-term exposure to
asymmetric retaliation from Palestinian resistance, Syria, Lebanon,
and others. 

Each absence of consequence recalibrates expectations on both sides.
Within Israel, it reinforces the belief that force carries no
meaningful cost. Among those targeted, it sharpens incentives to
develop longer-horizon strategies of attrition and retaliation.
Geographic overreach further compounds these vulnerabilities.
Israel’s efforts to embed itself within overseas military
infrastructures in places such as Somaliland and southern Yemen (and
to establish bases through regional proxies like the UAE) expose
Israel’s operational reach to extended supply lines that are
distant, insecure, and vulnerable to interdiction. 

Rather than Israeli-operated facilities, these arrangements rely on
third-party bases (principally Emirati), whose stability depends on
shifting regional power dynamics and state priorities beyond
Israel’s direct control. Maintaining an effective presence at such a
distance raises the likelihood of further military stumbling blocks,
financial constraints, and unanticipated entanglements that may prove
difficult to sustain over time, especially as Yemen’s Ansar Allah
threatens to target any future military bases in Somaliland.

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* Israel; Jordan; Lebanon; Syria; Yemen; Iran; Expansionism;
Military Budget;
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