“We have the best technologies in the world”: Israeli defense firms expect Europe to return once Gaza fades from view
Despite sanctions and suspensions, industry leaders remain confident in long-term demand for Israeli weaponry.
Over the weekend, as the IDF completed its withdrawal from deep inside Gaza and Israelis celebrated the release of hostages, the assembly lines of several defense contractors kept running well into the Sabbath. The production surge that began in the early hours of October 7, two years ago, to supply the IDF with ammunition for its multiple fronts, shows no signs of slowing.
“We’re still working around the clock on some of these systems,” a senior executive at one of Israel’s major defense firms told Calcalist. “The IDF has consumed massive quantities of ammunition, and demand continues, both to replenish stockpiles as quickly as possible and to restock warehouses.”
That demand covers tank and artillery shells, loitering munitions, drones, missiles for air defense systems, and a range of other weapons ordered by the Defense Ministry, collectively worth tens of billions of shekels.
Despite this intense domestic production, the majority of Israel’s defense industry revenue still comes from overseas. Executives hoped that the end of fighting in Gaza might ease tensions in Europe, where frustration with Israel’s actions has led some governments to cancel or delay arms contracts.
What began with the exclusion of Israeli defense firms from major trade fairs in France has since spread to similar restrictions elsewhere. Spain’s government recently canceled contracts with Elbit Systems and Rafael worth about €600 million, while other countries have imposed informal embargoes, complicating access to key components and raw materials.
Europe’s rearmament push, which began in 2022 after Russia’s invasion of Ukraine, initially boosted Israeli arms exports, which hit a record $14.8 billion in 2024, with roughly half going to Europe. But the war in Gaza has reversed much of that goodwill.
Civilian casualties and destruction in Gaza, alongside inflammatory statements by some Israeli ministers about renewing Jewish settlement in the Strip, have eroded support for Israel and cast doubt on the future of its defense exports to Europe. Governments that once praised Israeli weapons for their battlefield performance now question whether buying them is politically defensible.
Executives at several major firms say the pace of new negotiations had slowed markedly and that representatives of countries that were interested in Israeli systems were waiting for the war to end. “If the war is really behind us, barriers will gradually come down and we’ll see renewed openness and approvals for new multibillion-dollar deals,” said a marketing manager at one leading company. “France, too, may change its approach, but no one expects it to happen overnight.”
While the Gaza war winds down, the ongoing conflict between Russia and Ukraine continues to drive Europe’s defense spending. “We have the best technologies in the world, proven over the past two years,” another marketing executive said. “Europe knows this, and once Gaza is off the front pages, negotiations will resume. I’m optimistic.”
Israel’s three major defense contractors, Rafael, Elbit Systems, and Israel Aerospace Industries, hold a combined order backlog of about 250 billion shekels, both domestically and abroad. The surge in demand during the past two years has pushed many firms to expand production capacity, aiming both to meet delivery schedules and to strengthen Israel’s independence in arms manufacturing, reducing its vulnerability to import restrictions and future embargoes.
“Ninety percent of our activity is currently focused on the Israeli market, but we’re gradually expanding exports, mainly to NATO countries,” said Lior Segal, CEO of Third Eye. “The end of the war doesn’t mean world peace. We have multi-year contracts worth 35–40 million shekels, and that figure will only grow.”
Alongside the production boom, defense companies’ R&D departments remain busy, analyzing lessons from the war and developing next-generation weapons systems for future conflicts.
