The Country That’s Winning Everything Except Its Future
Israel’s military power has never been greater. Its strategic options have never been narrower.
Grüezi!
Israel’s military capabilities have never been greater. Its intelligence services helped decapitate the Iranian regime. Its defence-tech sector has nearly doubled.
By every operational measure, the country is at the peak of its powers. And yet every military victory closes off a future option.
People have been writing off Israel for seventy-five years. Every decade produces analyses explaining why the current path is unsustainable — and yet every decade, Israel adapts, innovates, or simply gets lucky.
What’s different now is that the escape hatches are slamming shut.
1. Ingenuity in the Service of Incoherence
Israel’s security model depends on an American relationship that’s worth $300 billion in cumulative aid, nearly $22 billion of it since October 2023 alone.
That relationship has deep institutional roots that span US evangelicals, the defence industry, Congress, and a longstanding foreign-policy orthodoxy that cuts through both parties.
But Israel’s long-term sustainability requires a regional accommodation that would weaken the strategic rationale for the relationship’s current scale.
And its Gaza campaign has undermined the public support on which American political backing ultimately relies.
Every Israeli government since 1967 has deferred this tension — expanding settlements on to land that was “occupied” whilst maintaining the diplomatic fiction that some kind of territorial compromise remained just over the negotiating horizon.
That is gone. For Netanyahu’s coalition government, territorial maximalism is a condition of survival. Occupation is now annexation. Palestinian statehood is not simply rejected, Palestinian identity itself is denied.
Four developments have transformed the environment.
The twelve-day war with Iran in June 2025.
Operation Rising Lion, launched on 28 February 2026 with the US, escalating from nuclear-programme degradation to regime change to state fragmentation.
The rise of Turkey as a structural competitor filling the vacuum left by Iran’s decline.
And the accelerated de facto annexation in the West Bank, which shuts down — under any foreseeable future political coalition — the territorial settlement that every outside model of Israeli sustainability ultimately requires.
But first, a very necessary disclaimer about what this analysis is and isn’t.
It is, quite simply, a rundown of Israeli strategic coherence — whether the government’s actions are producing outcomes consistent with its own long-term viability.
It is not a moral accounting of the conflict. Palestinians appear primarily as a governance issue and a demographic variable, which is both analytically necessary and morally incomplete as a description of what is happening.
Palestinian political dynamics — the collapse of Palestinian Authority legitimacy, generational radicalisation, diaspora mobilisation — all act to limit Israeli options. But a newsletter can only do so much.
And the dependency traced here runs both ways — but ultimately Israel needs America more than America needs Israel.
And that gap is widening.
2. The $300 Billion Umbilical Cord
Could Israel get by without the US? That $300 billion bumper price only really translates to $4 billion annually, and Israel’s GDP is well over $500 billion.
But there’s a lot more than money at stake.
Start with ammunition and spare parts. Since October 2023, 800 transport planes and 140 ships have carried 90,000 tons of US arms and equipment into Israel. The Israeli air force flies F-15s, F-16s, and F-35s. Its reliance on US precision munitions became clear within weeks of the Gaza operation. Without a constant resupply from America, Israel cannot sustain a high-intensity war.
Then diplomacy. America’s UN Security Council veto has historically kept Israel inside the international legal order on its own terms. Trump has gone even further: undermining the ICC, defunding UN agencies, trashing multilateral institutions.
For Israel, Trump’s policies look like a gift. They aren’t. Protection that depends on one president’s preferences rather than institutional structures is as fragile as a White House whim.
Then there’s government finances. At 69% of GDP, Israel’s public debt looks unremarkable next to France or Japan. The level is not the problem. The direction of travel is.
In 2022, the government ran a surplus of 0.6% of GDP. By 2024, the deficit had hit 6.8% — a fiscal deterioration of more than seven percentage points in two years, comparable in speed to the COVID shock that hit Western economies in 2020. The difference is that pandemic deficits were temporary and reversed within two years. Israel’s are structural, driven by permanent war, and the IMF says current budget plans are insufficient to put the trajectory right.
Defence spending has nearly doubled as a share of GDP, from 4.4% to 8.8%, the steepest rise since 1967. All three major credit agencies downgraded Israel for the first time in its history to a level alongside Peru and Kazakhstan.
Every lever for fiscal correction is blocked by the same coalition dynamics that keep the government in power.
Countries with worse debt numbers manage because they borrow in currencies they control, have central banks that can absorb sovereign debt, or possess deep domestic capital markets. Israel borrows in shekels at home but needs dollars for its most critical expenditure — American weapons — and has no lender of last resort except Washington.
Netanyahu’s plan to invest over $100 billion in an independent arms industry over the coming decade is designed to reduce equipment dependency on the US — but it also requires exactly the engineering talent that is currently leaving the country.
Living without $3.8 billion of US military aid each year looks manageable against a $530 billion economy — replacing it would mean roughly a 2.5% increase in taxes, which is why Netanyahu talks about “tapering off.”
But the base case is the wrong number. Wartime aid has run at about $10 billion a year since October 2023. Replacing that would need a 6% increase in total tax revenue — on top of the existing deficit, on top of ultra-Orthodox exemptions from military service and productive employment, on top of the governance costs of occupied territories. And Israel is now permanently at war.
Lastly there’s US political protection. When Biden, a lifelong supporter of Israel, tried to place modest conditions on arms deliveries, Netanyahu went around him to Congress and won. Israel’s institutional hooks held: AIPAC and bipartisan orthodoxy. But what saved Israel was Congressional, not presidential support — and the political base beneath is not what it was.
Gallup’s February 2026 poll found that for the first time in 25 years, American sympathies are level-pegging: 41% now sympathise more with the Palestinians against 36% with the Israelis — within the margin of error, but a dramatic tightening of a gap that stood at 54-31 just three years ago. Among 18-34 year-olds, 53% sympathise with Palestinians. Even among over-55s — Israel’s strongest demographic, with 49% sympathising — support has fallen to its lowest level since 2005.
Public opinion hasn’t yet translated into policy. The Senate voted 53-47 to back Trump on the Iran strikes — the sole Democratic defector was John Fetterman, the sole Republican rebel was Rand Paul. In the House, a war powers resolution requiring Congressional approval for further strikes is being blocked by three Democrats who all receive substantial campaign contributions from AIPAC, which funnelled over $1.4 million their way in the last cycle alone. The institutional hooks hold.
The question for Israel is not whether American sympathy is shifting — it demonstrably is — but who, if anyone, pulls the trigger on patronage.
US backing is what allows Israel to defer every hard choice about what kind of state it wants to be.
And when the US public’s patience runs out, the bills will come due all at once.
3. A State That Can’t Reform Itself
Every model of Israel’s strategic future assumes a coherent and sophisticated state capable of executing strategy.
The country’s ultra-Orthodox demographics test that assumption. If you want to know what that means for Israel consider the Amish. They have a fertility rate of six children per woman.
Closed religious communities that reject modernity’s reproductive bargain tend to double their populations every 20 years or so. In the United States, the Amish number about 400,000 — less than one percent of any state they live in.
But there’s one place where they’re the majority: Holmes County, Ohio, where road signs accommodate buggies, the local economy is adapted to their rhythms, and governance bends around their way of life.
Imagine the Amish held the balance of power in Congress, extracted blanket exemptions from military service, and drew billions in federal funding for religious schools that don’t teach maths or science.
Imagine the entire United States becoming Holmes County.
That is Israel’s ultra-Orthodox future.
Ultra-Orthodox Jews also average over six kids per woman. By 2065, they could make up almost a third of Israel’s population.
A third of Israelis poorly educated. Mostly not working. Mostly skipping military service.
Currently over 70% of Israelis pass exams to qualify for university, but just 16% of ultra-Orthodox do. Even fewer ultra-Orthodox men get a bachelor’s degree in a country whose growth engine is a tech sector that runs on PhDs.
The Israel Democracy Institute warns that if things don’t change, GDP could fall by 10% by 2050.
Of the 24,000 ultra-Orthodox men who have received draft notices since July 2024, just five percent joined up. Under legal pressure, enlistment has picked up — it’s expected to be over 3,000 this year. But the IDF needs 14,000 ultra-Orthodox recruits every year to keep its numbers up.
And the legal pressure is likely to drop, because the coalition’s survival depends on ultra-Orthodox parties whose price is an opt-out from the obligations of citizenship.
Two of them already told Netanyahu they would block the 2026 budget unless he first passed a bill granting sweeping draft exemptions.
If the budget fails by March 31, the Knesset dissolves automatically and elections move forward by four months.
Netanyahu is threading a needle between losing those parties — which collapses his coalition — and capitulating on a bill that will incense the defence establishment and the Supreme Court.
Israel does have a domestic opposition — and a formidable one. The 2023 judicial crisis put hundreds of thousands in the streets and triggered an unprecedented reservist revolt.
But the movement that demonstrated Israeli civil society can mobilise at scale could not change the political calculus. Coalition politics in a fragmented parliament means that parties representing a fifth of the population hold an effective veto over military service, education reform, and territorial compromise.
The opposition can protest. It can’t govern without the same parties whose demands make reform impossible.
The same dynamic played out with the hostages taken on October 7. When recovering them conflicted with the war aims of far-right coalition partners, political imperatives won.
Of 251 people taken captive, the body of the last hostage was recovered 842 days later — from a cemetery in northern Gaza.
Released hostages’ families complained that the deals returning their loved ones were signed “despite some political leaders and not thanks to them.”
Israel’s government cannot be sustained and the country reformed at the same time.
4. Administrative Annexation
Strip away the diplomatic euphemisms and the settlement enterprise looks a lot like subsidised housing on hilltops that once belonged to someone else. The Israeli government builds the roads, pipes the water, provides the armed escorts and tax breaks. The settlers provide the flag.
It is a bargain as old as civilisation — Roman veterans were settled on conquered land for exactly the same reasons — and it has continued, without interruption, for six decades.
The settlement story touches on the raw nerve of the nation’s founding. The tension between those arriving and those displaced did not begin in 1967.
But the question here isn’t moral, it’s strategic. And strategically, the settlement process has continued under every political formation since the Six-Day War.
Labour governments built the Jordan Valley settlements and the Gush Etzion bloc. Likud hastened construction across the West Bank highlands. Unity governments continued both.
Rabin signed Oslo whilst settlement continued. Sharon evacuated Gaza’s 8,000 settlers in 2005 at the same time as allowing the expansion of the West Bank population by tens of thousands.
Settler numbers have grown from zero to over 730,000 across both the West Bank and East Jerusalem — through left-wing, right-wing, and centrist governments alike. No Israeli governing bloc has ever halted or reversed the trend. What they did do was maintain the ambiguity over the status of the land being settled. It remained “occupied.” The spoils of a victory the rest of the world refused to recognise.
The current coalition has approved 68 new settlements in three years. In February 2026, the cabinet authorised the resumption of land registration across Area C of the West Bank — a process frozen since 1968 — to be carried out not by the military administration but by the Justice Ministry and civilian agencies.
The week before, it enabled private Israeli citizens to buy land in the West Bank for the first time. The settlers’ governing body called it the most important decision in almost sixty years.
What was taken by war will be held by law.
But every settlement creates new obligations. Someone has to police it, service it, supply it, and administer the Palestinian population around it. And an army short of recruits is being asked to garrison an ever-expanding perimeter.
The international legal consequences look abstract while Trump is in office. He has neutered the ICC, sidelined the ICJ, treated international law as an inconvenience. But the rules still exist regardless: advisory opinions, genocide proceedings, arrest warrants that restrict Israeli officials’ travel across much of Europe and the Global South, court proceedings in the Netherlands over F-35 parts transfers, a Spanish arms embargo.
None of it matters when the Trump shield holds. All of it matters the day it drops.
And annexation blocks the single biggest diplomatic prize still available: Saudi normalisation. MBS has made Palestinian statehood his stated condition.
The Abraham Accords have formally survived October 7 — no signatory has broken ties, and defence cooperation with Morocco and the UAE has quietly continued.
But the framework is fraying: Bahrain’s ambassador post in Israel has been vacant since April 2025, the Negev Forum is suspended, and the UAE has warned publicly that annexation would be a red line.
The Gulf states still want Iran contained more than they want to punish Israel — but every land-registration order pushes normalisation further away.
5. Ruling Over Ruins
Binyamin Netanyahu wanted this war. He just couldn’t fight it alone.
After the twelve-day conflict with Iran in June 2025, both sides cut a temporary deal — neither would attack the other — buying time to rebuild. But by December, the window Netanyahu had waited for was opening.
Massive protests had erupted across Iran. The regime was at its most fragile point in decades — its economy failing, military degraded, its regional proxies shattered. And Netanyahu, with 2026 elections looming, needed the security triumph that only regime change in Tehran could provide.
Trump’s timing had almost nothing to do with Israel. Mired by a weak economy, unpopularity, and with the Epstein files dragging his presidency further into the mud, Trump was discovering hard power.
In January, the US had seized Venezuelan president Nicolás Maduro from Caracas in an operation that had seemingly vindicated military power as a universal remedy.
Oil markets were soft, spare OPEC+ capacity was available, and the diplomatic track with Iran provided cover for the military buildup running in parallel. When Trump proposed limited strikes, Netanyahu talked him out of it — not because he didn’t want a war, but because the planned attack didn’t go far enough.
The IDF chief of staff, the Mossad director, and the head of military intelligence all made secret visits to Washington. Israel shared its most sensitive intelligence, warning that inaction would look like weakness, and lobbied for maximum force.
On 23 February, Netanyahu informed Trump that Khamenei and senior advisers would be at a known location within days. The original strike plan was intended for late March. Netanyahu pushed to accelerate. The timeline collapsed.
On 25 February, Iran’s foreign minister said a “historic” agreement was “within reach.” On the 26th, the third round of talks in Geneva ended. Oman’s foreign minister announced that Iran had agreed to zero stockpiling of enriched uranium with full IAEA verification. A fourth round of talks was already scheduled.
On the 28th, the bombs began to fall. The US struck over 1,000 targets in the first 24 hours. Israel flew sorties against 500 more.
Iran’s supreme leader was killed. Its military command decimated. Its navy destroyed. By every operational measure, a spectacular success. But a decapitated state is not a defeated one.
And the nuclear question was the one that mattered — because it was the stated justification for the operation and the measure by which it must be judged.
The International Atomic Energy Agency’s confidential report to member states, circulated the day before the strikes began, revealed that Iran had stored approximately 441 kilos of uranium enriched to 60% purity in an underground tunnel complex at Isfahan that survived both the June 2025 strikes and this operation. That’s enough, if enriched further, for half a dozen or so nuclear weapons.
The agency has been locked out of verification since June 2025. It cannot confirm the current size, composition, or whereabouts of the stockpile. Iran’s enrichment infrastructure at Natanz and Fordow was devastated, but the most dangerous material — the stockpile closest to weapons-grade — is intact, unmonitored, and in the hands of a regime with nothing left to lose.
The Pentagon’s own intelligence assessment is that the programme was set back by at most two years, not “completely and fully obliterated” as Trump claimed. Israel’s public objective — the permanent elimination of the nuclear threat — was not achieved.
And the strikes did not contain proliferation. They accelerated it. MBS has said that if Iran gets the bomb, Saudi Arabia will follow. Turkey’s foreign minister warned that if Iran nuclearises, Turkey “may inevitably be forced to join the same race.”
The proposed US-Saudi nuclear deal — revealed in Congressional documents in February — provides enrichment capability under safeguards weaker than the standard set by the UAE deal. The operation that was supposed to end the nuclear threat has become the reason every regional power is pursuing one.
The regime’s institutions survive. The interim leadership council is already fracturing between pragmatists and IRGC hardliners. The Revolutionary Guards have activated their decentralised mosaic defence doctrine — over thirty independent provincial commands operating without Tehran’s approval. CSIS analysts assess that this is the beginning of a multi-year engagement, not its conclusion.
Hamas is destroyed and Gaza is rubble. Over 70,000 people are dead — most of them civilians, many of them children.
Gaza’s water infrastructure is gone, the costs of rebuilding it are estimated at $50–80 billion, and there’s no governance plan that works.
Hezbollah is down but retains tens of thousands of fighters. Syria’s regime has fallen and Turkey is filling the vacuum.
Every adversary Israel weakens or destroys produces a problem more expensive than the one it solved.
6. The Rival You Can’t Reach
For decades, Israel’s primary regional adversaries shared something that made them manageable: they could be isolated, sanctioned, and — ultimately — struck down. Iran, Iraq, Syria, Hezbollah, Hamas.
The methods were military and diplomatic, and they worked because those adversaries sat outside the Western institutional order.
Turkey does not. And just as destroying Iraq made Iran stronger, so destroying Iran makes Turkey more powerful.
And Russia, consumed by Ukraine, can no longer contain Ankara either. The two powers that historically balanced Turkey’s strength are both incapacitated. Turkey inherits by default.
The fall of Assad in December 2024 was a strategic windfall for Ankara. Erdoğan had cultivated Ahmed al-Sharaa’s HTS, who stepped in to replace him, for years. An August 2025 defence agreement formalised the arrangement. Over 20,000 Turkish troops remain in Syria, and last October the Turkish Parliament authorised their longest military mandate yet — three more years.
Erdoğan also secured a warm relationship with Trump, who called him “the one responsible” for Syria’s transition and dangled F-35 sales. Over Israeli objections Trump welcomed a Turkish role in stabilising post-war Gaza.
For its part, Turkey positioned itself in opposition to Israel, suspending all commercial links in August 2025, halting some $7 billion in trade.
In Syria, Israel wants Syria weak and fragmented. Turkey wants a strong, centralised, closely-aligned state.
When Turkey moved to establish a military presence at the Palmyra and T-4 airbases in March 2025, Israeli jets cratered the runways to prevent heavy-lift aircraft from landing. Jerusalem sees any Turkish military foothold near central Syria as a strategic red line.
The defence industry rivalry intensifies the competition — Israel is negotiating a $3.5 billion defence package with Greece, and selling the Barak MX to Cyprus. Turkey has responded by calling the Cyprus deal a “direct threat” to its national security.
Turkey has its own contradictions. Its inflation has come down from a peak above 58% but still runs above 30%. Erdoğan is 72, the succession question is unresolved — his son Bilal is being positioned but polls at just 14% — and the Kurdish dimension of its Syria involvement creates tensions with every partner it needs.
NATO membership pins Ankara down as much as it protects it — its room to escalate against a US ally has limits.
But Syria is only the beginning. With Iran broken and Russia distracted, Turkey is expanding influence across Iraq, the Turkic states of Central Asia, and the African continent — defence exports hit a record $10.5 billion in 2025, Turkish Airlines serves 64 African destinations, and the Organisation of Turkic States is evolving from a cultural forum into a nascent security architecture, with joint military exercises agreed for 2026 and the first meeting of Turkic defence industry heads held last year.
No other middle power operates across so many theatres at once. It has the second-largest military in the Alliance, a rapidly expanding domestic defence industry, and an economy that runs on trade rather than oil sales.
The tools deployable against Iran — sanctions, strikes, diplomatic isolation — are harder to wheel out against a NATO member that hosts American nuclear weapons at Incirlik.
Israel’s strategic model was built for a world in which adversaries could be dealt with through force and isolation.
If Iran fragments, Israel’s primary regional competitor becomes a state embedded in the Western military order, also backed by Washington, and championing a Palestinian cause which only serves to embarrass the Gulf states Israel needs for normalisation.
7. The Trilemma
Israel’s sway over its patron, and its military capabilities, have never been greater. Its intelligence services have demonstrated extraordinary reach. Iran’s leadership and forces have been crippled.
The region is in chaos. The global economy is on a knife edge. The table has been kicked over.
Meanwhile, Israel still faces the same impossible choice it has faced since 1967: Jewish homeland, inclusive state, big territory. Pick two.
Every temporary equilibrium since then has been a different variation on which one gets sacrificed.
The occupation sacrificed inclusion in the territories — a partition that held for decades.
Oslo tried to resolve it by giving up land, but it couldn’t deliver inclusion.
Now, no one even wants to try.
The one-state solution that critics advocate has its own impossibility: no political mechanism, no Israeli constituency, and a transition that requires the voluntary dissolution of the state by the people who control it.
The managed status quo that Israel’s defenders prefer has the compounding-cost problem.
Each cycle of military dominance is more expensive, more isolating, more dependent on a patron whose enthusiasm is eroding, more hemmed in by a hostile global public.
Even the tech economy — Israel’s great success story — is turning out to be another dead end. The $32 billion Wiz acquisition was the largest tech deal in Israeli history. Startup fundraising hit $15.6 billion. But new startup formation has halved to roughly 500 a year. Even in a global downturn, VC fundraising is down 80% from peak.
It turns out that prosperity prefers peace.
And that means Israel’s brain drain is accelerating — over 8,000 tech workers left after October 7. And the best AI work runs on American infrastructure. The record-breaking exits are, from a national-strategy perspective, the shifting of Israeli innovation onto American balance sheets.
The escape routes that worked before are closing. Strategic ambiguity on territory is gone, formalised out of existence by administrative annexation. Regional deterrence through force — still powerful, but hard to deploy when your principal rival sits inside NATO.
American patronage as blank cheque — still functioning, but the political base is narrowing and the mechanism that broke consensus on Ukraine exists in latent form.
The nuclear threat that justified the patron’s generosity is now driving regional proliferation rather than dependence on Israel’s deterrent.
Everyone knows what needs doing. Binyamin Netanyahu’s career has frequently involved pulling rabbits out of hats, but this would require an altogether different level of magical ability.
What remains in Israeli politics are a series of stopgaps, each sacrificing a little more manoeuvrability, each slightly less sustainable than the last.
The space between them is narrowing. And the commitments — territorial, military, legal, fiscal — all keep piling up.
Meanwhile, the country is not running out of power.
It is running out of room.
Thanks for reading.
Best,
Adrian