Israel
State of Israel
Yisra’el

State of Israel

Israel has become a regional economic and military powerhouse, leveraging its prosperous high-tech sector, large defense industry, and concerns about Iran to foster partnerships around the world. The State of Israel was established in 1948. The UN General Assembly proposed in 1947 partitioning the British Mandate for Palestine into an Arab and Jewish state. The Jews accepted the proposal, but the local Arabs and the Arab states rejected the UN plan and launched a war. The Arabs were subsequently defeated in the 1947-1949 war that followed the UN proposal and the British withdrawal. Israel joined the UN in 1949 and saw rapid population growth, primarily due to Jewish refugee migration from Europe and the Middle East. Israel and its Arab neighbors fought wars in 1956, 1967, and 1973, and Israel signed peace treaties with Egypt in 1979 and Jordan in 1994. Israel took control of the West Bank, the eastern part of Jerusalem, the Gaza Strip, the Sinai Peninsula, and the Golan Heights in the course of the 1967 war. It ceded the Sinai back to Egypt in the 1979-1982 period but has continued to administer the other territories through military authorities. Israel and Palestinian officials signed interim agreements in the 1990s that created a period of Palestinian self-rule in parts of the West Bank and Gaza. Israel withdrew from Gaza in 2005. The most recent formal efforts between Israel and the Palestinian Authority to negotiate final status issues occurred in 2013 and 2014, and the US continues its efforts to advance peace. Israel signed the US-brokered normalization agreements (the Abraham Accords) with Bahrain, the UAE, and Morocco in 2020 and reached an agreement with Sudan in 2021. Immigration to Israel continues, with more than 44,000 estimated new immigrants, mostly Jewish, in the first 11 months of 2023.

Former Prime Minister Benjamin NETANYAHU returned to office in 2022, continuing his dominance of Israel’s political landscape at the head of Israel’s most rightwing and religious government. NETANYAHU previously served as premier from 1996 to 1999 and from 2009 to 2021, becoming Israel’s longest serving prime minister.

On 7 October 2023, HAMAS militants launched a combined unguided rocket and ground terrorist attack from Gaza into southern Israel. The same day Israel’s Air Force launched air strikes inside Gaza and initiated a sustained air campaign against HAMAS targets across the Gaza Strip. The following day, NETANYAHU formally declared war on HAMAS, and on 28 October, the Israel Defense Forces launched a large-scale ground assault inside Gaza.

The Israeli economy has undergone a dramatic transformation in the last 30 years, led by cutting-edge high-tech sectors. Offshore gas discoveries in the Mediterranean place Israel at the center of a potential regional natural gas market. In 2022, a US-brokered agreement between Israel and Lebanon established their maritime boundary, allowing Israel to begin production on additional gas fields in the Mediterranean. However, Israel’s economic development has been uneven. Structural issues such as low labor-force participation among religious and minority populations, low workforce productivity, high costs for housing and consumer staples, and high income inequality concern both economists and the general population. The current war with Hamas disrupted Israel’s solid economic fundamentals, but it is not likely to have long-term structural implications for the economy.