– Yoni Barber
The Middle East’s diplomatic landscape has shifted dramatically over recent decades. The formal recognition of Israel and/ or a nascent Palestinian state serve as primary drivers of global geopolitical change. But what are the actual economic consequences for the nations making these declarations? Does diplomatic recognition accelerate economic growth, or damage it?
Recognising Israel
To understand current trends, we must look at history. Egypt took the first monumental step for a predominantly Islamic nation in 1979, signing the Egypt-Israel Peace Treaty, followed by Jordan in 1994. These early agreements were fundamentally about territorial resolution and border security rather than deep economic integration. They established a ‘cold peace’, successfully preventing further wars but yielding limited bilateral trade or cooperation.
The United Arab Emirates’ decision on August 13, 2020, to normalize relations with Israel marked a profound paradigm shift. Through the Abraham Accords, the UAE became the first Gulf nation to establish full diplomatic ties with Israel, notably doing so without requiring prior Israeli commitment to Palestinian statehood. This move was driven by a shared security concern over Iran and its proxies, a desire for advanced technological cooperation, and a broader macro-trend in the Gulf: the urgent need to diversify economies away from oil.
Has this recognition benefited the UAE? The economic indicators strongly suggest it has. Following the Accords, bilateral trade between the UAE and Israel surged from a few million dollars to billions. While Gross Domestic Product (GDP) is not the sole measure of economic health, it is a primary indicator. After some years of reducing growth, the UAE saw a rapid return to increasing GDP growth immediately following recognition, stabilizing into strong, consistent growth by 2023.
What about other nations that normalized relations with Israel in 2020 and 2021? Bahrain, Morocco, and Kosovo followed a similar pattern to UAE. These diverse nations experienced years of sustained overall reducing growth, followed by a severe contraction in 2020, and then a dramatic spike in GDP growth in 2021, eventually settling into steady growth from 2023 to the present. In short economic turnaround hinged on the point they recognised and cooperated with Israel.
Context is important. The 2020 economic plunge and the subsequent 2021 spike were primarily driven by the onset and initial recovery of the COVID-19 pandemic. Normalizing ties with Israel did not single-handedly cause the massive 2021 growth spikes; however, it did act as a powerful accelerator through new trade routes, direct foreign investment, and expanding tourism. Or perhaps normalization led growth while recovery from COVID helped? In the case of Sudan, the nation began following a similar trajectory to the other Abraham Accords signatories. However, any potential economic benefits were instantly erased by the outbreak of a devastating civil war in April 2023. Sudan’s economy consequently collapsed, with growth not returning until 2025.
Recognising Palestine
The recent surge of recognitions of a Palestinian state, especially by European and Anglo nations, reflects a gradual strategic recalibration of foreign policy rather than primarily a moral stance. Trade potential with the Palestinian territories is limited, as huge amounts of international aid have not been invested in developing the local economy but have instead been lost to corruption and financing activities linked to terrorism. However, these western governments are seeking to preserve and deepen economic, energy, and security cooperation with Arab and Islamic countries, which have become increasingly influential in global trade and diplomacy. This wave of Palestinian state recognitions occurred mainly between 2024 and 2025, coinciding with war in Gaza and growing United Nations pressure on Western powers to demonstrate commitment to the two‑state solution.
Following the COVID‑19 pandemic, the United Kingdom, France, Canada, Australia, Belgium, Luxembourg, Malta, Monaco, Andorra, and Portugal all experienced rapid GDP growth as their economies rebounded. However, that momentum soon slowed sharply, with growth rates flattening to near zero. This stagnation coincided with their coordinated recognition of a nascent Palestinian state administered by the Palestinian Authority, a body widely criticized for corruption and for continuing, under rebranded programmes, to provide lifetime stipends to individuals or families involved in terror and the murder of Israelis. Simultaneously, these nations suffered from high interest rates, energy costs, and high debt, while becoming increasingly antagonistic to Israel by imposing selective arms restrictions and shifting their diplomatic voting patterns at the United Nations.
Let us consider the economic impact of the previous wave of recognitions of a Palestinian state, this time across Latin America, as well as Iceland. These countries extended recognition between late 2010 and 2011.
In the years leading up to recognition, the Latin American states all experienced either modestly rising or modestly declining (still positive) GDP growth. None faced economic contraction. In the years immediately following recognition, however, all entered periods of shrinking GDP, an effect later intensified in 2020 by the global COVID‑19 pandemic restrictions. The sole exception was Guyana, whose economy underwent explosive expansion due to the 2015 discovery of massive offshore oil reserves. Significantly, around 2015, Guyana shifted toward a more pragmatic relationship with Israel, accrediting a new ambassador and seeking Israeli expertise in ‘smart’ agriculture and water management to help diversify its burgeoning economy, although its geopolitical stance remained unchanged. After 2020, these countries experienced rebound, returning to modest GDP growth around 2024–2025. Meanwhile, shifts in domestic leadership, intensified by the Gaza war, have recently pulled this group of states in opposite directions, some severing diplomatic ties with Israel while others, most notably Argentina, have moved toward unprecedented alignment.
Big Business
Finally, let us briefly consider the implications for major corporations of cooperating with Israel. The world’s ‘big five’ firms all operate within a thriving U.S. environment that has been historically, diplomatically, culturally, financially, and militarily supportive of Israel, an alignment underscored by the 2018 relocation of the U.S. embassy to Jerusalem, Israel’s capital.
NVIDIA is by far the world’s largest company by market capitalisation. CEO Jensen Huang has confirmed the company’s deep commitment to Israel. In March 2026, he explicitly stated, ‘We are 100% in Israel’, and reiterated that the country is NVIDIA’s ‘second home’.
Top 5 Companies by Market Cap (April 2026)
| Rank | Company | Market Cap (Approx.) |
| 1 | NVIDIA | $4.3 – $4.4 Trillion |
| 2 | Apple | $3.8 Trillion |
| 3 | Alphabet (Google) | $3.6 Trillion |
| 4 | Microsoft | $2.8 Trillion |
| 5 | Amazon | $2.3 Trillion |
Meanwhile, Alphabet, Amazon, and Microsoft provide essential cloud and defence infrastructure for Israel through massive government contracts, but maintain a more neutral, corporate tone to manage global sensitivities and internal dissent. Apple remains the ‘quietest’ partner, focusing its support on high-level hardware R&D and silicon design while avoiding political statements.
Clearly, cooperation with Israel does not harm big business and may be considered a decisive contributor to success.
Conclusion
The historical and economic data suggests a clear pattern: nations and enterprises that have shifted toward cooperation with Israel often experience accelerated innovation and growth. From the multi‑trillion‑dollar rise of global tech giants to the rapid economic diversification of the Gulf, the benefits of these partnerships are difficult to overlook. By contrast, the 2010/11 and 2024/25 waves of Palestinian recognitions coincided with periods of regional stagnation, while the post‑2020 Abraham Accords introduced a new paradigm in which pragmatic alignment delivers measurable prosperity. This shift pushes European and South American nations to reassess whether maintaining Palestinian recognition still aligns with their economic and strategic interests.
Ultimately, these modern diplomatic shifts appear to echo an ancient narrative. In the earliest scrolls of Genesis, a foundational promise was extended to Abraham: that those who blessed his land and descendants would themselves be blessed, while those who cursed them would be cursed. In the modern age this ancient principle seems to have found an empirical manifestation, as the ‘Abrahamic’ path of alignment yields a distinct and literal dividend for those who choose it.
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