Israel approves $45B defense budget as Iran war rages

JERSUALEM — The Knesset today passed its 2026 budget, including roughly $44.8 billion for defense, an increase of roughly $9.48 billion over the previous year’s military budget.

The vote, held in the early hours, approved an overall record $268 billion in government funding for 2026 and passed by a vote of 62-55. And with a supplemental related to the war with Iran expected, defense spending may increase again before the year is through.

Israel’s defense budget has undergone major increases in recent years, reflecting the country’s shift from low-level conflicts to a multi-front war that began on Oct. 7, 2023. In 2015-2016, the overall budget stood at $103 billion and the defense budget was $17.65 billion — roughly a 153 percent increase in just ten years.

But that number is even more astounding when you realize defense spending remained roughly the same from 2015 to 2022. It jumped to around $30 billion in 2024. Funding that year also had to cover costs related to evacuating Israeli communities in the face of war and rebuilding defenses along the borders; as well as funding the large reserve army of some 300,000 people who had been called up.

Israel has also had to add supplemental budgets due to the cost of war. In 2025 the supplemental budget amounted to another $12.5 billion, on top of the $32.7 billion defense budget, for a total of $42.7 billion, nearly what it is expected to be in 2026.

Discussing Israel’s “long and costly war,” Minister of Finance Bezalel Smotrich said that “the core of the budget is the addition of tens of billions so that we can finish the campaign and dramatically improve our geopolitical and diplomatic standing. We will be able to dismantle and reassemble the Middle East. This budget gives the country the ability to win.”

The Joint Committee of the Finance Committee and the Foreign Affairs and Defense Committee approved the 2026 defense budget on March 24. It passed the committee unanimously and reflects increased investment for Operation Roaring Lion, the Israeli strikes on Iran that began on February 28.

“The Foreign Affairs and Defense Committee has been conducting intensive and continuous work these days surrounding the war,” committee chair MK Boaz Bismuth said. In addition, “approximately ₪22 billion [$7 billion] constitute expenditure contingent on income, including the U.S. aid grant and other revenues,” while “about ₪82.2 billion [$25.8 billion] are allocated for future commitments.”

The costs of the war and investment in various defense systems also include outlays for rehabilitation and support for wounded soldiers and others affected by the long war.  

“Israel has shown that in an agile and innovative economy, a heavy expenditure on defence can actually be translated into powerful engines for growth,” Eran Lerman, a former deputy for foreign policy and international affairs at the national security council in the Israeli prime minister’s office, told Breaking Defense.

Lerman, who is also vice president of the Jerusalem Institute for Strategy and Security, noted that even if some thought the war would “break our neck, in practice it became more muscle bound.” 

In general, the increased budget is not seen as a surprise in Israel, considering the ongoing wars and daily rocket fire from Iran, which sends millions of people to bomb shelters several times a day.

In addition to the current war effort, Israel has been seeking to invest more in local defense industries and procurement. For instance, Israel’s Ministry of Defense said in a statement on March 30 that “as part of its ongoing effort to bolster IDF operational endurance and readiness for the evolving campaign,” it had completed a deal with Elbit Systems for $48 million worth of 155mm artillery shells.

“The munitions will be manufactured at Elbit facilities nationwide, where thousands of employees are already working around the clock in three shifts at the Ministry’s direction,” the ministry noted. It added that this was part of its broader strategy “to reduce reliance on external munitions sources and grow Israel’s domestic defense production base.” The ministry has been focused on accelerating production of munitions during the war.

The ministry said on March 26 that to keep Israel supplied amid the Iran conflict, 200 cargo aircraft had landed in Israel in roughly a month of war. The ministry did not specify where the aircraft have arrived from. They have been “carrying approximately 8,000 tons of military equipment, weaponry, and munitions,” the ministry said. “The air and sea bridge serves as a critical component in this effort, strengthening operational continuity, supporting the full range of IDF needs, and enhancing readiness and stockpiles.”

The changes in the multi-front conflict as Israel has shifted focus from Gaza to Lebanon and Iran has also resulted in changes to the budget and the supplemental additions over the years. The Gaza conflict, which began with the Hamas attack on Oct. 7, 2023, wound down with a ceasefire in mid-October 2025, though the IDF continues to keep several brigades in Gaza. On March 2, days after the conflict with Iran began, the IDF also launched operations against Hezbollah in response to attacks from the group.