Israel’s Tech Sector Thrives Despite Ongoing Conflict and Challenges

Israel’s economy continues to thrive despite ongoing military conflict, with rapid construction and a robust technology sector defining its landscape. Tower cranes dot the skylines of cities like Tel Aviv, Jerusalem, Netanya, and Ashdod, symbolizing a nation that refuses to slow down. The construction boom reflects an economy that remains resilient, with high-tech industries at its core.

Tech Economy Driving Growth

Approximately 11% to 14% of Israel’s salaried workforce is employed in high-tech roles, one of the highest proportions globally. This sector significantly contributes to the nation’s economy, accounting for over 20% of its GDP and more than 50% of exports. Currently, around 400,000 Israelis work across more than 9,200 technology companies, ranging from startups to established multinationals.

Israel’s reputation as the “Startup Nation” is well-founded. With a population of fewer than 10 million, it ranks third in the world for the number of companies listed on the Nasdaq, trailing only the United States and China. As of recent reports, over 130 Israeli firms are publicly traded on Nasdaq, giving investors access to sectors including cybersecurity, biotechnology, and financial technology.

Encouraging Innovation and Investment

Israel showcases a unique blend of innovation, necessity, and supportive government policy to foster entrepreneurship. The country invests more than 4% of its GDP in research and development, the highest percentage worldwide. Moreover, the Israeli government incentivizes new immigrants and returning citizens with a ten-year exemption on foreign income tax. This combination fuels the nation’s innovative spirit and ensures its place at the forefront of global technology.

Even during periods of conflict, Israel’s tech ecosystem continues to expand. In mid-2024, the government announced a $100 million support fund, matched by private sector contributions, aimed at sustaining startups during disruptions. The cranes in the sky are not just symbols of construction; they represent resilience and the unyielding drive of the Israeli people.

The question of how investors can participate in Israel’s growth is readily answered through exchange-traded funds (ETFs). While there are no Israel-focused ETFs available on Canadian exchanges, several options can be accessed through U.S. markets. Notable ETFs include:

– EIS (iShares MSCI Israel ETF)
– ISRA (VanEck Israel ETF)
– IZRL (ARK Israel Innovative Tech ETF)
– ITEQ (Amplify BlueStar Israel Technology ETF)

Recent performance data (in USD) demonstrates the potential of these funds:

– EIS: +57.0% (1-Year Return), +18.4% (3-Year Annualized), +14.3% (5-Year Annualized)
– ISRA: +37.6% (1-Year Return), +8.7% (3-Year Annualized), +8.5% (5-Year Annualized)
– IZRL: +36.0% (1-Year Return), +13.3% (3-Year Annualized), +2.4% (5-Year Annualized)
– ITEQ: +16.3% (1-Year Return), +4.8% (3-Year Annualized), –0.1% (5-Year Annualized)

Source data provided by BlackRock, VanEck, Amplify, and ARK through mid-2025 illustrates that, despite market volatility, Israel’s equity sector has yielded strong returns, particularly in the past year.

In conclusion, Israel presents a complex landscape for investors. The nation faces ongoing geopolitical challenges yet persists in building, innovating, and exporting ideas globally. Its vibrant tech sector and entrepreneurial culture create a compelling investment opportunity, albeit one that should be approached as a small yet promising segment of a diversified portfolio. Investors are encouraged to consult with financial advisors to determine the appropriateness of U.S.-listed Israel ETFs in their investment strategies.

— Michael Silver, B.Comm. (Hons), CFP, CHS, Managing Partner — W.P.G. The Wealth Planning Group.