Israel’s defense exports reached a new all-time high in 2025, climbing to nearly US$19.2 billion despite mounting international criticism, boycott campaigns, and restrictions on Israeli participation in several major global defense exhibitions.

According to figures released by Israel’s Ministry of Defense on June 2, defense exports surged almost 30 percent from the previous year’s record of US$14.8 billion, marking the fifth consecutive year of growth and underscoring the continued global demand for Israeli military technology.

The latest figures were published by the ministry’s International Defense Cooperation Directorate (SIBAT), which oversees defense export promotion and international military cooperation. The data reveal that Israeli defense manufacturers secured unprecedented sales even as the country remained engaged in multiple military conflicts following the October 2023 Hamas-led attacks that triggered a prolonged regional confrontation.

The achievement is particularly notable given the political and diplomatic challenges faced by Israel over the past two years. Israeli defense companies have encountered growing opposition in parts of Europe and elsewhere, including exclusions from major defense exhibitions and calls for international boycotts linked to the wars in Gaza, Lebanon, Iran, and other regional theaters.

Nevertheless, Israeli defense firms not only met domestic military requirements during wartime but also fulfilled existing export commitments while securing significant new contracts abroad.

The US$19.2 billion export figure represents a dramatic increase from recent years. Israel exported approximately US$13 billion worth of defense products in 2023 before rising to US$14.8 billion in 2024 and reaching the latest record in 2025.

“This is the highest figure ever recorded and the fifth consecutive year in which a new record was set for Israel’s defense exports,” the Defense Ministry said in a statement accompanying the release of the data.

The growth comes at a time when Israel is already among the world’s leading arms exporters. According to the Stockholm International Peace Research Institute (SIPRI), Israel ranked as the world’s seventh-largest exporter of major arms during the 2021–2025 period, accounting for approximately 4.4 percent of global exports.

Given the nearly 30 percent increase recorded in 2025, analysts expect Israel’s share of the global arms market to rise further when future international rankings are published.

A key feature of the latest figures is the growing importance of government-to-government (GTG) agreements. According to SIBAT, approximately US$10 billion—more than half of total defense exports—came through such arrangements.

These agreements are typically negotiated directly between governments, with Israeli defense companies acting as subcontractors rather than primary contracting parties. The model is often viewed as more efficient because it reduces bureaucratic hurdles and can accelerate procurement timelines.

One prominent example is Germany’s acquisition of the Arrow 3 missile defense system, a deal signed between the Israeli and German governments while Israel Aerospace Industries served as the principal industrial contractor.

“The historic record in government-to-government deals—approximately US$10 billion—is not only an economic figure; it reflects the deepening of strategic partnerships and the growing international trust that the Ministry has built with defense ministries around the world,” the Defense Ministry said.

Missile, rocket, and air defense systems remained the largest category of Israeli defense exports in 2025, accounting for 29 percent of total deal volume.

Although this share was lower than the 48 percent recorded in 2024 and 36 percent in 2023, the category continued to dominate export sales, reflecting sustained international demand for advanced missile interception and air defense technologies.

The strong performance comes amid heightened global concerns over missile threats, drone attacks, and regional conflicts, which have driven many countries to strengthen their defensive capabilities.

Observation and optronics systems recorded one of the most significant increases, rising from 6 percent of export volume in 2024 to 22 percent in 2025. Radar and electronic warfare systems accounted for 11 percent of exports, broadly unchanged from the previous year.

Other categories included manned aircraft and avionics systems at 11 percent, command, control, communications, computers, and intelligence (C4I) systems at 7 percent, weapon stations and launchers at 6 percent, drones and unmanned aerial vehicles at 4 percent, satellites and space systems at 3 percent, vehicles and armored personnel carriers at 2 percent, intelligence and cyber systems at 2 percent, maritime systems at 2 percent, and ammunition and armaments at 1 percent.

Israeli officials attributed much of the increased demand to the operational performance of the country’s defense systems during recent conflicts.

“The unprecedented operational achievements, along with the combat experience gained by Israeli developments during the war, created high demand for Israeli technology among many countries,” the ministry stated.

Several systems received extensive operational exposure during recent military campaigns, including the Arrow 3 missile defense system, the Barak naval air defense system, and emerging laser-based air defense technologies.

Despite growing political criticism of Israel in parts of Europe, the continent remained the largest destination for Israeli defense exports in 2025.

European countries accounted for 36 percent of total exports, equivalent to approximately US$5.6 billion. Although lower than the 54 percent share recorded in 2024, Europe continues to be Israel’s most important regional market.

Germany remains one of Israel’s most significant customers. SIPRI data indicate that Israel supplied 55 percent of Germany’s arms imports between 2021 and 2025, making it Germany’s largest foreign defense supplier during that period.

The landmark Arrow 3 missile defense agreement signed in 2023, valued at approximately US$3.8 billion, remains the largest defense contract in Israeli history and symbolizes the expanding security relationship between the two countries.

Israel is also a major supplier to the United Kingdom, accounting for roughly 8.2 percent of British arms imports during the same five-year period, according to SIPRI.

The continued strength of European demand stands in contrast to growing political tensions surrounding Israel’s military operations in Gaza and elsewhere.

The Asia-Pacific region emerged as the second-largest market for Israeli defense products in 2025 and recorded some of the strongest growth rates.

The region accounted for 32 percent of Israeli defense exports, compared with 23 percent in 2024. In monetary terms, exports nearly doubled from approximately US$3.4 billion to US$6.1 billion.

India remains Israel’s single largest export destination. SIPRI data show that India absorbed 29 percent of all Israeli arms exports between 2021 and 2025.

During the same period, Israel supplied 15 percent of India’s total arms imports, making it New Delhi’s third-largest defense supplier after Russia and France.

The relationship has been built over decades and spans missile systems, air defense technologies, drones, surveillance equipment, and electronic warfare systems.

The Philippines has also emerged as a significant customer, with Israel supplying roughly 20 percent of the country’s imported defense equipment.

One of the most striking developments in the latest export figures is the rapid growth of Israeli defense sales to Middle Eastern countries.

The region accounted for 15 percent of Israeli defense exports in 2025, up from 12 percent in 2024 and just 3 percent in 2023.

In value terms, exports to Middle Eastern countries rose from approximately US$1.77 billion in 2024 to nearly US$2.88 billion in 2025.

The increase reflects evolving regional security dynamics and the continuation of defense relationships established following normalization agreements between Israel and several Arab states in recent years.

North America also expanded its share of Israeli defense imports, accounting for 13 percent of total exports in 2025, compared with 9 percent in the previous year.

The record export performance comes despite a series of diplomatic and commercial setbacks faced by Israeli defense firms.

On June 2, France announced restrictions on Israeli participation at Eurosatory, Europe’s largest defense exhibition, scheduled to take place in Paris from June 15 to 19. Israeli government representatives were barred from participation, the country was denied a national pavilion, and companies were prevented from displaying offensive weapon systems.

The move follows earlier French decisions that excluded Israeli companies from the 2024 Eurosatory exhibition and imposed restrictions at the 2025 Paris Air Show.

Elsewhere, Israeli firms were denied participation in the Netherlands Defense Exposition and Symposium (NEDS), while the United Arab Emirates reportedly barred Israeli companies from participating in IDEX 2025.

Several governments have also taken steps to reduce or cancel procurement relationships with Israeli defense manufacturers.

Spain canceled defense contracts worth more than US$1 billion, including plans to acquire SILAM rocket launcher systems based on Elbit Systems’ PULS platform, anti-tank missile launchers, and Rafael’s Litening 5 targeting systems.

Spanish Prime Minister Pedro Sánchez has linked such decisions to concerns over Israel’s military operations in Gaza.

In another significant development, Slovenia announced a comprehensive arms embargo against Israel in 2025, becoming the first European Union member state to prohibit all arms imports, exports, and transit involving Israel.

Israel’s export growth has drawn comparisons with Russia, another major arms exporter that has experienced a dramatic decline in foreign defense sales since the outbreak of the Ukraine war.

According to SIPRI, Russian arms exports fell by roughly 50 percent between 2019–2023 compared with the previous five-year period.

Other analyses suggest an even steeper decline. The Jamestown Foundation estimates that Russian arms exports dropped by as much as 92 percent between 2021 and 2024 as Moscow redirected industrial resources toward domestic military requirements while facing sanctions, inflation, and financial pressures.

In contrast, Israeli defense companies have managed to sustain exports while simultaneously supporting wartime production for domestic military needs.

The Defense Ministry emphasized that Israeli industries have operated “round-the-clock production” to support both the Israel Defense Forces and foreign customers.

Israeli Defense Minister Israel Katz said the export figures demonstrate international confidence in Israel’s defense establishment despite the challenges posed by ongoing conflicts.

“These achievements are built on the IDF’s capabilities and those of our broader security forces—in Gaza, Lebanon, Iran, and Yemen,” Katz said.

As geopolitical tensions continue to reshape defense procurement priorities worldwide, Israel’s latest export figures suggest that operationally proven military technologies remain highly sought after, even amid political controversy. The record-breaking results indicate that, for many governments, strategic and security considerations continue to outweigh diplomatic pressures when making defense procurement decisions.

China’s confirmation that its export-configured J-10CE fighter jet has achieved its first combat victory marks a pivotal moment in modern aerial warfare, signalling both the maturation of Chinese aerospace engineering and a structural shift in the global fighter aircraft market amid intensifying great-power competition.

The announcement by the State Administration of Science, Technology and Industry for National Defense (SASTIND), which included the J-10CE’s battlefield performance among China’s Top 10 National Defence Science and Technology Achievements for 2025, represents the first official acknowledgement that a Chinese-exported combat aircraft has decisively engaged and defeated advanced Western-origin fighters in live combat.

“In mid-May, the country’s export-oriented J-10CE fighter jet achieved its first combat victory, shooting down multiple aircraft in air combat without suffering any losses itself,” SASTIND said in a statement. The wording is notable not only for its clarity, but also for the fact that it constitutes a state-endorsed validation of Chinese air-combat lethality, rather than an unverified foreign military claim or media report.

Amplified by state outlets including Xinhua and ECNS, the disclosure emerged from the brief yet highly consequential Indo-Pakistani aerial confrontation known as Operation Sindoor, an episode that compressed decades of theoretical debate over beyond-visual-range (BVR) combat into a matter of days.

According to Pakistani accounts, Pakistan Air Force (PAF) J-10CE fighters neutralised multiple Indian Air Force (IAF) aircraft without losses of their own. If accurate, the engagement represents the first instance in which Chinese avionics, sensors, missiles, and networked combat doctrine were tested against Western platforms in a peer-level air battle.

Pakistani Foreign Minister Ishaq Dar underscored the broader implications when he said that PAF fighters had brought down Rafales and that “they [the Chinese] were pleased,” a remark widely interpreted as evidence of how closely Beijing monitored the operational performance of its export flagship under real combat stress.

The implications extend far beyond the subcontinent. For dozens of air forces reassessing procurement strategies, the J-10CE’s combat debut reshapes calculations about cost-effective alternatives to Western fighters that increasingly exceed USD 100 million per unit.

More critically, China now possesses one of the most powerful marketing assets in the global arms trade: battlefield validation. Historically, real combat performance has been the single most influential factor driving fighter aircraft export success, often outweighing technical specifications on paper.

As geopolitical fragmentation deepens and arms embargoes proliferate, the J-10CE’s performance positions China as a credible, combat-proven supplier capable of challenging entrenched Western and Russian dominance across multiple regions.

The Chengdu J-10CE is the culmination of nearly four decades of Chinese aerospace ambition. Originally conceived during the Cold War as a lightweight interceptor, the J-10 has evolved into a multirole combat aircraft capable of contesting advanced fourth-plus-generation Western fighters.

Developed by Chengdu Aircraft Corporation under the Aviation Industry Corporation of China (AVIC), the programme reflects Beijing’s long-term strategy to eliminate reliance on foreign combat aircraft while building an export-oriented defence industrial base.

The export-configured J-10CE incorporates structural refinements, upgraded avionics architecture, and enhanced weapons integration compared with earlier domestic variants. These upgrades enable it to function as a fully networked node within modern sensor-fusion and integrated air-defence environments.

Powered by the WS-10B Taihang turbofan, producing roughly 113 kilonewtons of thrust with afterburner, the aircraft can exceed Mach 2.0 and achieve a combat radius of more than 1,150 kilometres. Its delta-canard design, paired with a digital fly-by-wire system, provides high manoeuvrability while preserving energy during BVR engagements.

Central to its sensor suite is the KLJ-7A active electronically scanned array (AESA) radar, reportedly capable of tracking multiple targets beyond 150 kilometres and guiding several missiles simultaneously via secure datalinks.

With 11 hardpoints and a payload capacity of up to seven tonnes, the J-10CE can carry advanced air-to-air missiles, precision-guided munitions, and stand-off weapons. Its integration with the PL-15 BVR missile—believed to have a range exceeding 200 kilometres—fundamentally alters engagement geometry by compressing adversary reaction time.

Crucially, all of this comes at an estimated unit cost of USD 40–50 million, dramatically undercutting Western rivals while offering comparable lethality on paper.

Pakistan’s decision to procure the J-10CE in 2020 followed a reassessment triggered by the 2019 Balakot crisis, when Islamabad identified gaps in its long-range air-combat deterrence relative to India’s acquisition of the Rafale.

By May 2025, the Pentagon’s China Military Power Report confirmed the delivery of 20 J-10CE aircraft to Pakistan, with a total order of 36 expected by early 2026. The fighter now forms a cornerstone of Pakistan’s evolving air doctrine, supplementing the JF-17 Thunder and enabling the retirement of ageing Mirage III and V fleets.

PAF Air Chief Marshal Zaheer Ahmed Baber Sidhu described the aircraft as a “strategic equaliser,” highlighting its role in restoring deterrence along the Line of Control.

Operational integration focused heavily on BVR proficiency, sensor fusion, and cooperative engagement with ground-based early warning and air-defence systems, including Chinese-supplied surface-to-air missiles. By 2022, operational squadrons had reportedly achieved full mission readiness.

Operation Sindoor in mid-May 2025 marked a rare real-world confrontation between Chinese-exported airpower and Western-origin fighters. Triggered by cross-border incidents and escalating retaliatory strikes, Indian aircraft—including Rafales—conducted deep penetration missions.

Pakistan scrambled J-10CEs to intercept, marking the first documented use of Chinese AESA-equipped fighters and long-range missiles against Western platforms in combat.

Pakistani officials claim a lopsided kill ratio, asserting that multiple Indian aircraft were downed without PAF losses. Indian responses were cautious, with anonymous sources acknowledging aircraft losses while attributing them to intelligence failures and underestimation of Pakistan’s BVR capabilities.

Fragments identified as PL-15 missiles recovered near crash sites have been cited as circumstantial evidence supporting Pakistani claims, though full independent verification remains limited.

Regardless of contested details, the engagement has altered perceptions. In South Asia, it compresses Indian decision-making timelines and reinforces Pakistan’s deterrence posture. Analysts say it raises questions about survivability in environments dominated by long-range sensors and missiles.

Beyond the region, the episode has implications for Taiwan, the Middle East, and Africa—areas where Chinese doctrine emphasises layered denial and long-range engagement.

For Beijing, the J-10CE’s validation strengthens defence diplomacy and bolsters claims of technological self-reliance. SASTIND explicitly noted that the achievement enhances the “international competitiveness” of Chinese aviation products.

Interest in the aircraft has reportedly intensified from Egypt, Uzbekistan, Indonesia, Iran, and Bangladesh, driven by budget constraints, sanctions risk, and the appeal of combat-proven systems without political conditionality.

China’s confirmation of the J-10CE’s maiden combat triumph marks a watershed in global air-combat history. It signals that Chinese aerospace systems have crossed a critical threshold—from theoretical challengers to combat-validated alternatives—reshaping assumptions about air superiority, deterrence, and the future balance of power in the global fighter market.

Beyond tactics, the episode underscores a broader shift: air dominance in the coming decades will hinge less on platform pedigree and more on the effectiveness of integrated, networked kill chains. For defence planners worldwide, the message is clear—the era of unchallenged Western monopoly in high-end air combat is drawing to a close.

Germany has announced it will restart exporting weapons to Israel following a ceasefire in Gaza more than a month ago.

The German government said exports would resume from 24 November after it suspended sales of military equipment that could be used in the Gaza Strip in August.

Germany – the second largest supplier of arms to Israel behind the US – stopped shipments after Israel approved a ground offensive to take over Gaza City.

Since then, Israel and Hamas have signed the first phase of a peace deal that came into force on 10 October. Germany said the ceasefire had now “stabilised” and that was the basis for them to lift the suspension.

A spokesperson for the German government said on Monday: “We expect everyone to stick to the agreements that have been made.

“This means that the ceasefire holds, that humanitarian aid is provided on a large scale and that the process continues in an orderly manner as agreed.”

At the time of the initial suspension, Israel had approved a plan to capture and occupy all of Gaza City, which the UN warned would lead to “more massive forced displacement” and “more killing”.

The plan drew widespread condemnation from Israel’s allies including Germany, a staunch supporter of the country following the Nazi Holocaust during World War Two when more than six million Jewish people were killed.

Chancellor Friedrich Merz said in August that while Israel had “the right to defend itself against Hamas’ terror”, the German government was “profoundly concerned about the continued suffering” of people in the Gaza Strip.

Between 2020 and 2024, Germany accounted for 33% of Israel’s military arms imports, according to the Stockholm International Peace Research Institute.

The majority of these were warships followed by torpedoes. Germany also supplies parts for engines used in Merkava tanks.

A government spokesperson said that from next week, a decision on arms exports to Israel would be “made on a case-by-case basis”.

Hamas-led gunmen attacked Israel on 7 October 2023, killing about 1,200 people and taking 251 hostage.

At least 69,483 Palestinians have been killed by Israeli military action in Gaza since then, according to the Hamas-run health ministry.

Since the ceasefire came into effect, Hamas has returned 20 living hostages in exchange for 250 Palestinian prisoners and 1,718 detainees from Gaza.

Hamas also returned the remains of 25 out of 28 deceased hostages.

The reputation of Chinese military hardware and equipment has suffered a significant blow following a series of prominent export failures, with analysts warning that these setbacks could impede Beijing’s long-term defence ambitions. According to a report published on Saturday by the Dhaka-based Lens Asia, multiple issues — from malfunctioning frigates to grounded fighter jets and underperforming laser defence systems — have cast a shadow over China’s image as a reliable arms supplier.

Despite being the world’s fourth-largest defence exporter, trailing only the United States, Russia, and France, China’s defence credibility and product sustainment record are increasingly being questioned by both buyers and independent experts. “Root causes are multiple and interacting,” the Lens Asia report said, adding that “chronic corruption, industrial unevenness, gaps in precision component manufacturing, procurement misconduct, and political pressure to showcase quick results” have all contributed to the decline in quality of Chinese defence products.

One of the most visible examples of these problems involves Pakistan’s F-22P frigates, which were built by China’s Hudong–Zhonghua Shipbuilding Group. Reports from Pakistani defence analysts and naval officials have pointed to repeated sensor and radar defects, along with engine overheating and crankshaft failures that have reduced the vessels’ operational readiness.

“The Chinese firm admitted that defective Gimbal Assembly motors were the cause of the fault, and these motors had not yet been repaired or replaced,” the report noted. This has jeopardised the frigates’ berthing and combat operations, forcing the Pakistani Navy to operate with compromised capabilities. “Some key mission objectives for which these expensive ships were acquired have been jeopardised,” it added.

China’s jointly developed JF-17 Thunder fighter jet — co-produced with Pakistan — has also drawn criticism. According to the Lens Asia report, Myanmar, Nigeria, and other JF-17 customers have experienced repeated mission-computer malfunctions, vibration issues, and airframe cracks, leading to fleet groundings in some countries.

In Nigeria, where the aircraft was touted as an affordable multirole platform, performance shortfalls reportedly led the air force to shift to the Italian M-346FA fighter jets, which offer superior reliability and weapon precision. “JF-17’s poor accuracy and low weapon-carrying capacity forced Nigeria to diversify,” the report stated, adding that spare parts shortages and poor after-sales service have compounded customer frustration.

Another setback for China’s defence technology came from Saudi Arabia, which had procured the Chinese SkyShield laser counter-drone system to enhance its protection against aerial threats. However, field reports indicate that the system has struggled in desert environments, suffering “significant performance degradation” due to dust, heat, and optical interference.

The Lens Asia report highlighted that these failures were observed during real-world operations rather than manufacturer tests, making them more credible. “The SkyShield system was anticipated to offer a cost-effective solution integrating electronic warfare with directed-energy weapons,” it said. “However, its failure in real-world conditions cast deeper doubts on the credibility of the controlled testing and the overall product quality.”

Beyond these individual cases, analysts note that structural weaknesses within China’s defence industrial base are undermining the reliability of its exports. The report links these issues to corruption within the People’s Liberation Army (PLA), ongoing purges ordered by President Xi Jinping, and “rushed production schedules” designed to meet political milestones rather than technical standards.

China’s rapid military modernisation drive has often prioritised quantity and demonstration over quality assurance and long-term sustainment, experts cited in the report argue. “Maintenance and logistics shortfalls, coupled with weak feedback loops between the military and industry, have led to recurring product failures,” one regional analyst was quoted as saying.

Many of China’s export clients have also raised concerns about inadequate spare parts supply, delayed technical support, and limited warranty coverage, leading to what the report describes as “erosion of confidence” among international customers.

“These complaints gain further traction when PLA media itself emphasises the need to treat equipment quality as life-or-death for soldiers,” the Lens Asia study noted. Such public admissions by Chinese military outlets, it said, implicitly acknowledge ongoing shortcomings in design, testing, and quality control.

While China continues to make inroads into developing markets in Africa, the Middle East, and South Asia, these persistent quality issues may hinder its efforts to challenge Western and Russian dominance in the global arms trade. Experts believe that without addressing systemic inefficiencies and improving customer support, Beijing risks losing its credibility as a dependable defence exporter.

“China’s defence industry has shown impressive capacity for scale and speed,” the report concluded, “but sustaining that growth requires the same rigor, transparency, and engineering discipline that define mature global arms suppliers.”

The UK’s High Court has rejected a case brought by campaigners trying to stop the transfer to Israel of all British-made spare parts for US-produced F-35 fighter jets, saying it didn’t have the constitutional authority to intervene.

The government suspended about 30 arms export licences to Israel last September because of a risk of UK-made weapons being used in violations of international law in the Gaza Strip.

But the UK supplies components to a global pool of F-35s which Israel can access. The government had argued it could not pull out of the defence programme without endangering international peace.

Amnesty International and Human Rights Watch expressed their dismay at the ruling.

Both groups had intervened in the case.

“The horrifying reality in Gaza is unfolding in full view of the world: entire families obliterated, civilians killed in so-called safe zones, hospitals reduced to rubble, and a population driven into starvation by a cruel blockade and forced displacement,” said Sacha Deshmukh, chief executive of Amnesty International UK.

“This judgment does not change the facts on the ground, nor does it absolve the UK government of its responsibilities under international law.”

The two judges said the case was not about whether the UK should supply arms and other military equipment to Israel – because the government had decided it should not.

They were being asked to decide on a particular issue: whether the UK “must withdraw from a specific multilateral defence collaboration” because of the prospect that some UK-manufactured parts may be supplied to Israel and used in contravention of international law in the conflict in Gaza.

“Under our constitution, that acutely sensitive and political issue is a matter for the executive which is democratically accountable to parliament and ultimately to the electorate, not for the courts,” they ruled.

UK industry makes 15% of every F-35, according to the Campaign Against the Arms Trade.

Oxfam, which provided evidence to the court, said: “It is unconscionable that the government would continue to license the sale of components for F-35 jets knowing that they are used to deliberately attack civilians in Gaza and destroy their means of survival, including vital water supplies.”

The case was brought by al-Haq, a group based in the Israel-occupied West Bank, and the Global Legal Action Network against the Department for Business and Trade.

The court said that Business Minister Jonathan Reynolds was “faced with the blunt choice of accepting the F-35 carve out or withdrawing from the F-35 programme and accepting all the defence and diplomatic consequences which would ensue”.

The government also argued pulling out of the defence programme could undermine US confidence in the UK and Nato.

But human rights groups argue that the global rule of law is under threat over Gaza.

“The atrocities we are witnessing in Gaza are precisely because governments don’t think the rules should apply to them,” said Yasmine Ahmed, UK director of Human Rights Watch.

“Judicial deference to the executive in this case has left the Palestinians in Gaza without access to the protections of international law, despite the government and the court acknowledging that there is a serious risk that UK equipment might be used to facilitate or carry out atrocities against them.”

The government says it will continue to keep its defence export licensing under review.

“The court has upheld this government’s thorough and lawful decision-making on this matter,” a spokesman said.

Lawyers for the human rights groups are considering if they can find grounds to appeal.

RIYADH: Saudi Arabia is rapidly transforming into a regional technology hub, drawing comparisons to Silicon Valley, thanks to a wave of strategic investments and high-profile initiatives, experts have told Arab News.  

At the heart of this transformation is Project Transcendence, a groundbreaking $100 billion initiative launched in 2024.   

Spearheaded by the Kingdom’s Public Investment Fund in partnership with Google, the project aims to build a comprehensive artificial intelligence ecosystem within Saudi Arabia.  

The initiative is set to bolster the growth of local tech startups, generate employment opportunities, and foster collaborations with global technology firms — positioning the Kingdom at the forefront of regional innovation.  

Complementing these efforts is the annual LEAP technology conference, which continues to gain international attention. The 2025 edition of the event attracted over 170,000 visitors and secured investments exceeding $14.9 billion, underscoring Saudi Arabia’s growing appeal as a technology and innovation destination.  

These developments are central to the Kingdom’s broader economic reform strategy under Vision 2030, which aims to diversify the economy and reduce its longstanding reliance on oil revenues.  

With strategic initiatives and strong global partnerships, Saudi Arabia is cementing its place as a key player in the global tech landscape.  

Speaking to Arab News, Noor Al-Nahhas, co-founder and CEO of UAE-based software company nybl, said: “Saudi Arabia is rapidly transforming into a global technology hub, driven by Vision 2030’s ambitious agenda. The Kingdom is creating a robust ecosystem for tech startups to thrive while accelerating investments in AI and deep tech — technologies that are critical to furthering the progress of the sector.”   

He added: “With the emerging developments we are seeing in the Kingdom, obstacles are few — this is the Silicon Valley of the Middle East and a rising force in the global tech landscape.”   

Mamdouh Al-Doubayan, managing director of Globant for the Middle East and North Africa region, also echoed similar views. He said that Saudi Arabia’s investments in the digital infrastructure should be supported with key partnerships to achieve the desired results.  

“The Kingdom is making substantial investments in digital infrastructure while fostering an ecosystem that nurtures innovation and entrepreneurship. Key partnerships are pivotal to driving this vision forward,” said Al-Doubayan.   

The crucial SME factor  

Vikas Panchal, general manager, Middle East, for Indian multinational technology company Tally Solutions, told Arab News that small and medium enterprises in Saudi Arabia have a huge role to play as the Kingdom continues its technological evolution journey.   

“Saudi Arabia is rapidly advancing in its digital transformation journey, with SMEs playing a pivotal role in this evolution. The Kingdom’s Vision 2030 has placed technology and digitalization at the forefront of economic diversification, fostering a pro-business environment where SMEs are seen to continuously succeed in,” said Panchal.   

He added that government-backed programs like Monsha’at’s SME support initiatives as well as investments in AI, fintech and e-commerce are equipping businesses with scalable digital tools, thus allowing them to compete on a global scale.   

“With streamlined business regulations and a growing interest in pursuing tech-driven efficiencies, Saudi Arabia is on track to becoming a global tech hub,” Panchal added.  

Homegrown innovation   

Amid these advancements, experts also highlighted potential challenges that Saudi Arabia may encounter as it strives to establish itself as a global tech destination.  

Al-Doubayan noted that while the Kingdom is making significant progress in digital transformation, addressing certain challenges will be crucial to ensuring sustainable growth.  

He pointed out that one of the key obstacles Saudi Arabia may face is building a robust talent pipeline to support the burgeoning tech sector.  

“While the Kingdom invests in education and training, attracting and retaining skilled professionals in a competitive global landscape remains critical,” said Al-Doubayan, adding: “Additionally, navigating regulatory frameworks and ensuring a supportive environment for innovation can be complex, especially as the country seeks to balance rapid technological advancement with traditional practices.”  

Panchal said that some of the challenges faced by the Kingdom include costs for digital transformation, especially among SMEs in the Kingdom.  

 “While large corporations are quickly embracing AI and automation, many SMEs still face challenges in transitioning from traditional to digital operations. The lack of expertise in adopting cloud-based financial management, tax automation, and real-time accounting can slow down their competitiveness,” said Panchal.   

He added: “For some SMEs, the initial cost of transitioning to fully digital operations can be a challenging feat. By empowering SMEs with affordable, easy-to-use technology solutions, Saudi Arabia can overcome these hurdles and accelerate toward its goal of achieving a truly tech-driven economy.”   

Al-Doubayan also expressed similar views and said that some companies are facing the risk of infrastructural limitations, as developing the necessary digital and physical infrastructure to support ambitious projects can be both time-consuming and costly.  

Al-Nahhas said that Saudi Arabia should strengthen its AI capabilities to truly achieve its tech ambitions in the future.   

“One critical factor to consider is the speed at which the global AI race is evolving. This will be a vital aspect to remain cognizant of as Saudi Arabia pushes forward in pursuit of meeting its Vision 2030 goals,” said the nybl CEO.  

He added that Saudi Arabia should try to develop its local ecosystem for technological innovation rather than importing it from other nations.   

“A striking example is DeepSeek, which in a short span has developed an AI model capable of rivalling those from Silicon Valley and disrupts the sector in unprecedented ways,” said Al-Nahhas.   

DeepSeek, a chatbot developed by China, uses advanced large language models and was first launched on Jan. 10.   

Upon its release, it quickly outpaced ChatGPT, becoming the most downloaded freeware app on the iOS App Store in the US.   

The impressive performance of DeepSeek, coupled with its relatively low cost, has made waves globally, challenging the dominance of US-based AI models.   

Thanks to its Natural Language Processing technologies, DeepSeek is able to understand, interpret, and generate human language more effectively, resulting in a 60 percent reduction in irrelevant search results compared to traditional search engines.  

Al-Nahhas added: “This highlights the sheer speed of innovation in the tech sector, but also raises a fundamental question: ‘Why should we import tech when we have the resources and vision to create it in the Kingdom?’ To truly lead, Saudi Arabia must double down on homegrown innovation — over-reliance on external solutions risks dependency and could slow progress.”  

During the recent LEAP conference, held in Riyadh from Feb. 9 to Feb. 12, Saudi Minister of Communications and Information Technology Abdullah Al-Swaha also talked about DeepSeek and said that it is beating all AI models.   

“We have to celebrate the ChatGPT moment of 2022, but we also have to appreciate the DeepSeek moment. The world does not need polarization in the intelligent age. We need to work collectively to celebrate these advancements, where DeepSeek so far is beating all AI models,” the minister said.   

Al-Nahhas added that Saudi Arabia has a massive opportunity to set global benchmarks by developing AI and deep tech in-house, and can ensure that technology is not just made for the Kingdom, but can be exported worldwide, contributing to the growth of the country’s economy.   

“Competing on the global stage requires a mindset shift: Saudi Arabia is not just a consumer of technology, we are creators, driving the next wave of innovation from the Kingdom to the world,” said Al-Nahhas.   

Dhruv Verma, founder and CEO of Thriwe, a tech-driven benefits as a platform company which expanded its presence to Saudi Arabia in 2023, said that stringent data protection laws may pose hurdles for foreign tech companies, making long-term private sector engagement vital for sustainable growth.   

“As digitalization accelerates, the risk of cyber threats and data breaches increases, emphasizing the need for robust cybersecurity measures and cross-border collaborations,” said Verma.   

Arun Bruce, CEO of Dubai-based management consultancy firm TransformationX, told Arab News that Saudi Arabia should strengthen its startup ecosystem to ensure that the technology sector will thrive long term.   

He also echoed the views of Al-Nahhas that the Kingdom should avoid over-dependence on international technologies, and should develop advanced innovations locally.   

“The tech startup scene in KSA is certainly strengthening  — with multiple accelerators and government initiatives — but still has some way to go as it competes with global and regional startup hubs,” said Bruce.   

He added: “As Saudi Arabia seeks to grow, localizing its tech inputs becomes important. Companies like PIF-backed ALAT are certainly taking the Kingdom in the right direction.” 

RIYADH: Saudi Arabia’s financial markets are on a sharp upward trajectory despite challenging global economic trends, experts have told Arab News.

Market volatility across the world — as seen by the S&P 500 dropping below 6,000 on Wednesday — together with US President Donald Trump’s policies prompting oil market uncertainty, and continuing supply chain disruptions, are increasing investment risks.

However, the Kingdom’s economic resilience, backed by Vision 2030’s diversification efforts and strong regulatory reforms, has helped Saudi Arabia mitigate these challenges.

In 2024, the economy rebounded with a 1.3 percent growth, driven by a 4.6 percent increase in non-oil activities, despite a decline in oil activities.

Saudi Arabia’s financial ecosystem is poised for even greater growth, but the key question remains: Can it continue to solidify its position as a global financial hub in such an unpredictable environment?

Vikas Papriwal, leader of FTI Consulting Middle East and Africa, told Arab News the Kingdom is very much in charge of its own destiny in this regard.

“The key to future-proofing against oil market volatility and maintaining leadership in the global energy industry is for Saudi Arabia to continue to place significant emphasis on researching, developing, and innovating in the space of renewable and sustainable energy and be leaders in the global energy transition,” he said.

Saudi Arabia’s progress can also be seen in its extensive regulatory reforms. The country has worked hard to ensure that its financial markets align with international best practices, providing greater transparency, stability, and ease of access for investors.

“Reforms that can fortify the Kingdom’s position as a financial powerhouse include further easing processes for operating and starting businesses, particularly through legal and tax reforms,” said Papriwal.

Rezwan Shafique, principal of financial services at Arthur D. Little, told Arab News that those reforms are just the starting line, emphasizing that the path toward becoming a powerhouse is now underway.

“Government and regulatory reforms, such as Companies Law, CMA (Capital Market Authority) strategic plans, and MISA (Ministry of Investment) guidelines, have laid the groundwork by improving corporate transparency, stability, and predictability. The Kingdom is now in a phase to communicate opportunities to global players,” Shafique added.

He noted that Saudi Arabia has already made progress in this area, highlighting that the country’s share in the MSCI Emerging Markets Index has risen to 4 percent from 2.7 percent in 2019. He also pointed out that foreign ownership in the Saudi Exchange has increased 25-fold over the past five years, reaching $100 billion, signaling expanding opportunities for global investors.

“Gaining traction on new listings and becoming a multi-jurisdictional player should be a key focus. A number of factors will need to converge, including Saudi Arabia actively forging ties between itself, China, Singapore, and African nations through strategic partnerships,” he said.

Indeed, Saudi Arabia’s ambition to lead the region in financial services is evident. Over the past few years, its exchange, Tadawul, has made tremendous strides, earning a spot among the top 10 global stock markets.

Its market capitalization reached $2.9 trillion as of late 2024, with the Kingdom continuing to attract significant foreign investments, especially in light of the world’s largest initial public offering — Aramco’s listing in 2019, which raised over $25 billion.

“Tadawul’s inclusion in major global indices like MSCI and FTSE has increased foreign investor participation, while the size and scale of recent initial public offerings have showcased the Kingdom’s ability to attract significant global capital,” said Serkan Teker, financial services partner at Deloitte Middle East.

He added that to rival global giants such as Wall Street and London, Saudi Arabia must continue evolving its capital markets by enhancing liquidity, diversifying sector representation, and improving transparency.

Teker also highlighted how the banking sector has been a significant driver of the Kingdom’s non-oil gross domestic product expansion. It posted an “impressive annual growth of almost 11 percent between 2018 and the beginning of 2023, maintaining strong asset quality with non-performing loans gradually declining since the first shock waves of the COVID-19 pandemic.”

Beyond the financial sector, Saudi Arabia’s broader economic strategy also focuses on creating new business environments and fostering innovation to attract foreign investors.

Teker said: “The Kingdom could also look into creating new free zones and specialized economic zones for key areas of strategic focus, such as healthcare, biotech, and information and communications technology. Additionally, continued investment in transformative urban projects that allow KSA to act as a central hub for commerce and hospitality will further strengthen its position on the global stage.”

The Deloitte partner went on to explain that Saudi Arabia’s rapid advancements in artificial intelligence, fintech, and digital banking are transforming the country into a global innovation hub. And he cited regulatory initiatives including the FinTech Sandbox and the adoption of Open Banking as helping the Kingdom become a magnet for tech startups and international investors.

He added that initiatives such as digital-only banks and AI-driven solutions in finance and healthcare are positioning Saudi Arabia at the forefront of cutting-edge financial technology.

The Kingdom’s fintech market, in particular, has experienced exponential growth — up 25 percent in 2024 according to the Saudi Central Bank — reflecting the increasing importance of digital transformation to the economy.

“Saudi Arabia is making significant investments in AI and related infrastructure, including a $40 billion tech fund and targeted investments in AI companies and startups. The launch of the Saudi Artificial Intelligence Authority is expected to accelerate innovation across key industries such as healthcare, finance, and manufacturing,” FTI Consulting’s Papriwal added.

Tadawul, however, is not without its challenges. Geopolitical instability in the Middle East remains a persistent concern, and the volatility of global markets — particularly oil price fluctuations — continues to affect the broader economy.

“Tadawul needs to evolve in two ways: first, from a domestic exchange to multi-regional, and second, toward a technology company enabling financial services firms to develop and execute investment strategies,” said Arthur D. Little’s Shafique.

Looking ahead, Saudi Arabia’s ability to expand its financial markets, further diversify its economy, and continue its digital transformation will be crucial in maintaining its upward trajectory.

The Kingdom is already focusing on innovation, sustainable finance, and digital platforms as part of its broader Vision 2030 agenda. This vision positions Saudi Arabia not only as a regional player but also as a leader in global financial markets.

Teker emphasized that Saudi Arabia can strengthen its claim as a global financial powerhouse by expanding digital and financial inclusion through digital banking solutions and financial literacy programs would help reach underserved segments of the population.

Additionally, he highlighted the importance of deepening capital market reforms, introducing advanced financial instruments, and attracting foreign participation to enhance liquidity and diversify investment options.

Teker also explained that by leveraging regulatory frameworks, fostering partnerships between banks and fintech firms, and attracting international digital players, Saudi Arabia can establish itself as a global fintech hub and strengthen its position in the rapidly evolving financial services sector.

“We believe some of these forward-looking actions, aligned with Vision 2030’s ambitious goals, can further propel Saudi Arabia into global financial leadership while driving inclusive and sustainable economic growth,” he said.

The discussion about suspending arms sales began under the last Conservative government but it came to a head under the new Labour administration.

Labour said it had not changed its position on supporting Israel’s security, which it describes as “solid” and “unyielding”.

But this marks the third time since Labour took power in July that they have deviated from the previous Tory government’s approach.

Two weeks into government, Labour announced it would resume funding UNRWA, the UN’s agency for Palestinian refugees following a review of alleged links between its staff and terror groups.

Days later Labour announced it was dropping plans to challenge the right of the International Criminal Court (ICC) to seek an arrest warrant for Israeli Prime Minister Benjamin Netanyahu.

The Labour government has called for an immediate ceasefire in the war between Israel and Hamas, the release of all hostages and an increase in the amount of aid to civilians in Gaza.

Some backbench Labour MPs have been urging Prime Minister Keir Starmer to go further and ban British arms sales to Israel completely.

Labour lost a number of former strongholds to independent candidates campaigning on pro-Palestinian platforms in the general election.

Already the government’s critics are saying the suspension has not gone far enough.

Liberal Democrat foreign affairs spokesperson Layla Moran said her party would “carefully scrutinise” the details of the announcement, “including those export licences which the government has not suspended”.

“We are concerned that the decision is made solely on risk of use in Gaza and not the West Bank,” she added.

Green MP Ellie Chowns asked why so many licences were exempt from the suspension.

“I am very concerned that the government is not consistently applying the principle that there is a clear risk of UK licensed weapons being used in breach of international humanitarian law,” she said.

But Conservative MPs – including the shadow foreign secretary Andrew Mitchell – have criticised the decision.

Mr Mitchell said the move had al”l the appearance of something designed to satisfy Labour’s backbenches, while at the same time not offending Israel, an ally in the Middle East”.

“I fear it will fail on both counts,” he added.

The Campaign Against Arms Trade says that since 2008, the UK has granted arms export licences to Israel worth £574m ($727m) in total.

Research by Parliament, external shows the value of licences granted has declined from £42m in 2022 to £18.2m in 2023.