What Netanyahu said and why it matters now
Benjamin Netanyahu told Israel's Channel 10 he is mapping out methods to avoid possible banking restrictions, saying, "We need to prepare ways to evade banking sanctions through an alternative economic system." Asked if that meant crypto, he replied, "Very correct," adding, "You know what that means - the currencies that can bypass them. I'm working on that too." The remarks came as campaigning intensifies ahead of the Oct. 27 election.
He also cautioned that decades of US military support would not last forever. "If you think we will continue receiving what I secured twice - tens of billions of dollars in American aid for the defense budget - you'd better prepare yourselves and get used to the idea that this will not continue," he said.
"That is because America has changed, not because Israel has changed. It will end. It is only a matter of time." He stated that two years remain with US President Donald Trump, and urged planning for a less favorable stance from Washington after he leaves office.
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The political backlash and the sanctions backdrop
Opposition leader Yair Lapid blasted the idea, writing on X that such a plan "belongs to countries like Iran, Russia, and Venezuela - nations whose banks are cut off from the world, whose companies cannot accept payments, and whose young people are fleeing." Avigdor Liberman, the Israel Beytenu leader and former finance minister, said Netanyahu "is finally admitting that Israel faces a real danger of diplomatic isolation and economic sanctions, yet instead of explaining how he intends to prevent them, he is already talking about preparing a 'sanctions-bypassing economy,'" and pledged to "break Israel out of diplomatic isolation and eliminate the threat of sanctions" if the opposition wins.
Last month, a group of 12 countries, headed by the UK, pledged joint measures focused on Israeli settlements in the West Bank. UK Foreign Secretary Ed Miliband said the steps would also extend to people and businesses that provide money, building work and other services for the settlements. That has fueled concern about penalties on Israeli lenders and the knock-on risk to an economy anchored by tech exports. Yair Avidan, formerly the Bank of Israel's banking supervisor, warned, "The concern is that foreign banks will cease providing correspondent services to their Israeli counterparts, effectively severing Israel's ability to conduct international economic activity."
Aid, defense spending and the investment angle
The US and Israel have a memorandum of understanding that runs through 2028, providing $3.8 billion a year, mainly for buying American military goods. Over the three years following Hamas' October 2023 attack, which claimed 1,200 Israeli lives, Washington provided no less than $15 billion in additional support. Netanyahu said Israel can shoulder higher defense costs after robust expansion despite those three years of conflict. "For years, we kept defense spending under control to encourage economic growth," he said. "Now the economy must support defense, because without security, there will be no economy."
For portfolios with exposure to Israel, the mix of crypto talk, potential curbs on correspondent banking, and questions around future US funding point to one theme: financial plumbing risk. Watch for concrete policy moves on sanctions and any banking channel disruptions, plus signals from the Oct. 27 election that could shape the direction of aid, defense outlays, and the broader investment climate.
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