Tech and war: Israel's tech sector under severe pressure

The Israeli technology sector is under severe pressure due to the ongoing conflict with Iran. A recent survey of 637 companies reveals a sector in serious disarray. It serves as a stark reminder: global conflicts invariably reshape the technological landscape.

Problems with raw materials; capital inflows stall

Nearly half of the companies are currently missing more than a quarter of their staff. This absence is caused by military reserve duty and strict security measures. The impact on productivity is immediately visible on the shop floor. Companies are struggling with delays in the development of new products.

Then there are business operations. Over 75 percent of companies are affected by international travel restrictions. This complicates business meetings, sales discussions, and the formation of new partnerships.

The supply chain is also faltering significantly. Among manufacturing technology companies, 76 percent report a negative impact on production capacity. One in five companies is facing major delays in importing essential raw materials.

The inflow of new capital is also stalling. Over 70 percent of the surveyed companies are experiencing difficulties in raising funds. Investors are postponing decisions or withdrawing entirely.

Startups and tech giants

This trend is not limited to local startups. According to the survey, international giants are also feeling the pressure from the conflict. More than half of the multinationals in Israel are seeing an increase in requests from local staff to be transferred.

War always impacts tech

War almost always causes disruption in the tech sector. It devastates the tech sector while simultaneously accelerating innovation. In Ukraine, the Russian invasion led to a massive acceleration in drone innovation, while thousands of IT professionals fled to safer areas or abroad. The economy also contracted by approximately 30% in the first year of the war, putting tech companies under severe pressure. Research projects also stalled; international collaborations ground to a halt, and publications dropped sharply in the hardest-hit areas.

An uncertain outlook

It remains to be seen how Israel’s tech sector will be affected. The future of the technology industry is closely tied to the duration of the conflict. In any case, the Israeli Ministry of Finance has already sharply revised downward its economic growth forecasts for 2026. Expected growth fell from 5.2 percent to a maximum of 3.8 percent. At the same time, defense spending is rising to a record high of $221 billion.