JERUSALEM: Israeli Prime Minister Benjamin Netanyahu has openly acknowledged that Israel is sliding into deepening isolation as outrage mounts over nearly two year war in Gaza, admitting the country may be forced into a self-reliant economic model if arms embargoes and trade suspensions continue to spread.
Speaking in Jerusalem on Monday, Netanyahu conceded that Israel is “in a sort of isolation” and might soon be compelled to adopt what he called “autarkic characteristics,” an economy cut off from foreign trade. “We will increasingly need to adapt to an economy with “autarkic characteristics”,
“It’s a word I hate,” Netanyahu said, adding that it was he who had brought a “free-market revolution to Israel.”
“We’ll need to develop our weapons industry – we’re going to be Athens and super Sparta combined. We have no choice, at least for the coming years when we’ll be required to deal with these isolation attempts,” he said.
Israeli stocks declined sharply, with the benchmark TA-35 Index falling as much as 1.25% to the lowest since Sept. 3, before paring losses.
The remarks come as Europe hardens its position against Israel amid accusations that it is starving Gaza’s population by blocking food and aid deliveries.
U.S President Donald Trump also warned Israel after Doha attack, “Qatar has been a strong ally of the United States. They’re in a very complicated region, so they have to navigate things carefully and sometimes be politically cautious. But I can say they’ve been very supportive of us,”When it comes to Israel and others, we all need to be mindful. When we take action against others, we have to proceed with caution,”
EU Commission President Ursula von der Leyen last week accused Israel of creating a “man-made famine” in Gaza and urged governments to suspend elements of the EU-Israel Association Agreement, a cornerstone of trade worth some €70 billion annually.
A wave of governments across Europe has already halted weapons exports to Israel. Germany, Spain, Slovenia, and Ireland have all restricted or outright banned sales, while France is preparing to recognize Palestinian statehood at the upcoming UN General Assembly, the first G7 nation to do so. Public anger is increasingly spilling into cultural and sporting spheres.
Spain, Ireland, Iceland and the Netherlands have warned they will pull out of the 2026 Eurovision Song Contest if Israel is allowed to compete. Pro-Palestinian protests disrupted the Vuelta cycling race on Sunday, forcing Israel’s Premier Tech cycling team to face jeers from demonstrators. Even orchestras and chess tournaments have sidelined Israeli participants over their ties to the Gaza war.
Netanyahu’s political opponents have branded his talk of a closed economy delusional. Opposition leader Yair Lapid said, “Isolation is not a decree of fate, it is the product of a wrong and failed policy of Netanyahu and his government. They are turning Israel into a third-world country and are not even trying to change the situation.”
Business leaders have also warned that retreating into economic self-sufficiency would devastate Israel’s technology-driven economy, which relies on global investment and exports. “The idea that Israel can wall itself off from the world while waging an endless war in Gaza is not only unrealistic, it is ruinous,” one Tel Aviv business executive told Haaretz.
Criticism of Israel is no longer limited to progressive parties, as centrist and conservative governments across Europe face growing public pressure. Hugh Lovatt of the European Council on Foreign Relations notes a significant shift among traditional supporters of Israel, especially on the political Right, who are now increasingly critical due to public outrage over the humanitarian crisis in Gaza.
Even pro-Israel figures like Germany’s Friedrich Merz have refused arms sales for use in Gaza. Meanwhile, Spain, Ireland, and Slovenia have recognized Palestine, and UK Prime Minister Keir Starmer has warned he may follow suit if Israel does not agree to a ceasefire and allow immediate aid delivery.
In a strikingly inflammatory aside, Netanyahu suggested that Europe’s growing Muslim populations were “bending governments” toward anti-Israel positions. The remark, widely condemned as racist, underscored his increasing defensiveness as Israel faces unprecedented diplomatic and economic isolation.
For Israel, the stakes are immense. Nearly one-third of its foreign trade is with the European Union, and analysts say even partial suspension of trade agreements could deliver a severe blow. James Moran, former EU foreign policy adviser, said, “There’s a real prospect of something happening here. The fact that von der Leyen raised sanctions means she believes it’s achievable.”
As Netanyahu doubles down on prosecuting the war in Gaza despite mounting accusations of famine and collective punishment, critics argue that he is willing to sacrifice Israel’s global standing and its economic future to preserve his political survival. “The prime minister is openly steering Israel toward isolation,” said one EU diplomat in Brussels. “The question is whether Israelis are ready to pay the price for Gaza.”
For years, Israel has been considered an economic powerhouse regionally and globally, driven in large part by its vaunted high-tech industry. But the war has had an economic impact and is already the longest and most expensive in the country’s history.
