Opinion
In a fragmenting world, one investment destination stands out: Israel
"Investors face a simple question: Where will growth, resilience, and strategic alignment converge? Right now, there is a compelling case that the answer is Israel," writes Ezra Gardner, Co-Founder of Varana Capital.
If the past decade was defined by globalization, 2026 is shaping up to be the year of fragmentation. A new world order is not emerging gradually, it is being forced into place by overlapping geopolitical, economic, and technological shocks. And as these tectonic shifts redraw alliances and risk maps, they are also reshaping one of the most fundamental decisions global investors make: where to allocate capital outside the United States. From where I sit as an American investor, the conclusion is becoming increasingly clear: if you are investing abroad, you should be looking at Israel.
For years, Europe has been a natural destination for U.S. capital. That assumption is now being challenged. The growing divergence between the United States and Europe, across regulation, industrial policy, and geopolitical posture, is no longer theoretical. It is showing up clearly in the data. In 2025, the number of projects by American investors in Europe declined by 11% year-over-year, continuing a broader downward trend. More strikingly, over a third of global executives report delaying or reconsidering investments in the region.
This is not a cyclical dip. It is a structural recalibration. Europe’s leading economies: France, Germany, and the UK, are facing sustained pressure from energy costs, regulatory complexity, and an increasingly strained relationship with their closest economic partner, the United States. The result is a steady erosion in Europe’s attractiveness as a destination for American capital, one that is likely to deepen as geopolitical tensions continue to expand.
At the same time, the Middle East is undergoing a fundamental repricing of risk. For years, investors operated under a simple assumption: the Gulf offered stability, while Israel carried geopolitical risk. That equation no longer holds. Recent events have demonstrated that Gulf states, once perceived as insulated, are increasingly exposed to direct attacks and infrastructure disruptions. Even global technology companies operating in the region have not been immune. Meanwhile, Israel, despite being at the center of the conflict, has demonstrated a level of resilience and operational continuity that challenges long-held assumptions.
Distance from the primary sources of attack, combined with advanced defense capabilities and highly resilient civil infrastructure, has enabled Israel to maintain a functioning economy under pressure. Critical systems remain operational. Business continuity is preserved. And the home front, often overlooked in investment models, has proven remarkably stable. This matters because in today’s environment, resilience is the new stability.
These shifts are likely to have direct implications for how future capital is deployed, particularly in large-scale strategic initiatives. Take for example emerging U.S.-backed infrastructure programs in AI and energy across the Middle East. Plans that once prioritized Gulf-based deployments may now be revisited. It is not hard to imagine a “version 2.0” of these initiatives, one in which capital allocation is rebalanced considering new operational realities.
At the same time, the war has accelerated something even more significant: an unprecedented level of integration between the United States and Israel. This is no longer just a political alliance. It is becoming an integrated ecosystem. Joint supply chains are being built and stress-tested in real time. Technological collaboration, particularly in AI, defense systems, and critical infrastructure, is deepening rapidly. Systems are being integrated. Capabilities are being co-developed. And discussions that once seemed hypothetical, such as expanded U.S. military presence on Israeli soil, are now part of the strategic conversation. For investors, this has profound implications. Because where governments integrate, capital tends to follow.
Perhaps the most counterintuitive shift is this: the very risks that once deterred investment in Israel are being reassessed in real time. For decades, the possibility of a direct confrontation with Iran and its proxies was treated as a worst-case scenario. Today, that scenario is no longer hypothetical, and Israel’s performance under these conditions is reshaping investor perception. Rather than destabilizing the economy, the current conflict is demonstrating its resilience. Israel has degraded adversarial capabilities, pushed back long-term threats, and maintained operational continuity under sustained pressure. In contrast to other regions where conflict erodes investment value, Israel is showing that it can absorb shocks while preserving, and in some cases strengthening, its economic fundamentals. This does not eliminate risk. But it does change how risk is priced.
Global capital is entering a period of reallocation. Old assumptions are breaking down. New alignments are forming. In that environment, investors face a simple question: Where will growth, resilience, and strategic alignment converge? Right now, there is a compelling case that the answer is Israel. As an American investor looking ahead, I’m not hedging that view. I’m all in.
Ezra Gardner is the Co-Founder of Varana Capital.
