Tech and the Iran–Israel Proxy Conflict

The Iran–Israel proxy conflict has become a test for the potential power of advanced military and cyber technologies. Israel’s Iron Dome and other missile defense systems, while effective, are expensive to operate, as they cost tens of thousands of dollars per interception. As a result of this, Israel is developing more cost-efficient laser-based defense systems. Iran, however, is focusing more on cyber operations as they target infrastructure and financial systems in Israel and their allied countries. These attacks are often carried out through proxies that incorporate malware, espionage, and denial-of-service campaigns.

This tech-driven conflict comes with significant financial implications. Israel increased its defense budget in 2024 to more than $27 billion, which is driven by the rising costs of both kinetic and cyber warfare. Middle Eastern defense spending overall is capped at $200 billion, which reflects heightened regional tensions and an arms race that is supported by rapidly evolving technologies.

This war has affected global markets, as well. Defense and aerospace companies have seen rising stock prices as the demand for security systems also grows. Investors have resorted to firms involving missile defense, drone technology, and military AI solutions. The defense tech firm Elbit Systems, in Israel, has seen its stock price more than double this year, while U.S.-based contractors, such as Lockheed Martin and Northrop Grumman, have also benefited.

Cybersecurity and AI-focused companies are gaining attention, too. Palantir – in the USA –, which provides battlefield intelligence systems, has seen growth after securing important government contracts. Microsoft and other cloud providers can be expected to gain from governments spending more on digital defense, primarily in fields like surveillance infrastructure and threat detection powered by AI.

As tensions carry on, tech will continue to play a key role in both the battlefield and the financial markets. While some companies are expecting to benefit in the short term, long-term risks will persist, especially for firms that are overly reliant on government contracts and/or vulnerable to the volatility of international conflict.

Love, The Code4Hope Team

Article written by Aryan Varshney