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Algeria’s drive to modernize its military has fueled Middle East defense spending trends.
Middle East spending is on the upswing again. Defense expenditures in the region, excluding Iran, increased 21.8% in real terms to $195.4 billion in 2024 from $160.4 billion in 2021, marking its fastest period of growth for a decade.
Despite upheaval throughout the Middle East—the Israel-Hamas war, Houthi attacks on shipping in the Red Sea, the fall of the Assad regime in Syria—the rebound has not been regionwide. Instead, two countries have largely driven growth: Algeria and Israel. In some other states, funding has flatlined or declined.
- Algeria ramps up defense spending
- Israel has boosted budget since Oct. 7, 2023, attacks
Israel, following the Oct. 7, 2023, Hamas attack on its territory, increased its defense budget to 136.2 billion shekels ($38 billion) for 2025 from 74.8 billion in 2022. While the Israeli Defense Ministry’s core budget likely will remain elevated in the short term, the billions of dollars in supplemental war budgets the Knesset has granted since 2023 are likely to be withdrawn, with overall spending falling back as a result.
In Algeria, military spending has more than doubled in real terms over the past three years to $25 billion from $10.5 billion. The boost reflects an intensification in the country’s longstanding rivalry with neighbor Morocco—where defense commitments have also grown—particularly concerning the status of Western Sahara, and more recently Rabat’s normalization of relations with Israel.
The near-term outlook for regional defense spending likely will hinge on Persian Gulf states, where demand has slackened in recent years as governments have pursued more conservative fiscal policies.
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