War as a Catalyst: How the Middle East Conflict Is Reshaping the Surveillance Industry

Wars have always accelerated technology. The Second World War gave the world radar, jet propulsion, and early computing. The Cold War produced satellites and the internet. The conflicts now unfolding across the Middle East are producing something different: a global boom in AI-powered surveillance, and a set of questions about corporate complicity that the technology industry has never had to answer quite so directly.

Since the Hamas attack on Israel on October 7, 2023, and the subsequent military campaign in Gaza, the surveillance and defense technology sectors have experienced a structural shift in demand, investment, and public scrutiny. The changes are visible in defense budgets, stock prices, government procurement contracts, and the resignation letters of tech workers who say they can no longer work for companies supplying military clients.

The story is not simply one of industry growth. It is a story about what war reveals — about technology, about governance, and about the choices that companies make when geopolitics creates new commercial opportunities.

The Market Surge: Numbers Behind the Boom

The numbers tell a stark story. Global military spending reached an unprecedented $2.7 trillion in 2024, the steepest year-on-year increase in at least three decades. Countries in Asia, the Middle East and North Africa, and Europe saw major budget increases.

Within the Middle East specifically, the security market has expanded sharply. The Middle East security market reached $6.65 billion in 2024, with IMARC Group projecting growth to $20.6 billion by 2033 — a compound annual growth rate of 13.35%. The video surveillance segment is growing even faster: the MEA video surveillance market is expected to reach $9 billion by 2030, growing at a CAGR of 15.6% from 2025.

In the Gulf Cooperation Council states, the numbers are particularly striking. The GCC video surveillance camera market, valued at $1.68 billion in 2024, is expected to reach $4.6 billion by 2034 — a tenfold increase in a single decade. Industry analysts cite the Hamas attack on Israel and the subsequent assault on Gaza as direct drivers of heightened security awareness across the Gulf. Saudi Arabia is projected to spend $75 billion on defense in 2025 alone, investing heavily in surveillance systems and cybersecurity alongside conventional weapons procurement.

The cybersecurity component is equally significant. The Middle East cybersecurity market is projected to grow from $15.3 billion in 2024 to $34 billion by 2033. As physical and digital surveillance increasingly converge — with AI analyzing intercepted communications, movement data, and social media simultaneously — the line between the two categories is becoming difficult to draw.

The AI Targeting Question: Gaza as a Test Environment

Beneath the market statistics lies a more unsettling development: the use of artificial intelligence in military targeting operations at a scale and speed unprecedented in modern warfare.

Investigative reporting by +972 Magazine and Local Call revealed that the Israeli military has been using AI systems to generate targeting lists at a volume that would have been impossible through conventional intelligence analysis. The system known as “Lavender” reportedly generated lists of tens of thousands of individuals designated as potential targets, with limited human review of each recommendation. A second system, “Gospel,” identified buildings and infrastructure for strikes.

"The power of advanced algorithmic warfare systems is now so great that it equates to having tactical nuclear weapons against an adversary with only conventional ones."

— Alex Karp, CEO, Palantir Technologies

The involvement of US technology companies in this infrastructure has attracted significant scrutiny. Palantir Technologies signed a strategic partnership with Israel’s Ministry of Defense in January 2024, with Executive Vice President Josh Harris stating that “both parties have mutually agreed to harness Palantir’s advanced technology in support of war-related missions.”

In March 2024, Google deepened its ties with the Israeli Ministry of Defense by signing a new contract. Amazon Web Services and Microsoft have also been identified as providers of cloud infrastructure supporting Israeli military operations, with Microsoft’s average monthly use by the Israeli military rising 60% in the first six months of the conflict.

The scale of data involved is significant. A UN Special Rapporteur report states there are “reasonable grounds” to believe Palantir supplied predictive policing technology and core defense infrastructure powering several AI targeting platforms. Microsoft reportedly created a custom storage system on Azure to host 11,500 terabytes of Israeli military data, including approximately 200 million hours of audio from surveilled Palestinian phone calls.

The “Proving Ground” Argument

One of the more troubling claims to emerge from investigative reporting is that certain companies may have viewed the Gaza conflict as an opportunity to test and validate AI systems in live conditions. Contracts with the Israeli military have been touted by corporations eager to claim their wares as “battle tested,” with systems expected to circulate across global markets once their wartime performance is documented.

This is not a new dynamic. Israel has long positioned its defense technology sector — shaped by decades of occupation and conflict — as a proving ground for surveillance and security products subsequently marketed internationally. What is new is the involvement of US-listed technology companies at the scale and visibility seen in Gaza, and the degree to which AI systems are central to operational military decisions rather than peripheral support functions.

The GCC Response: Watching Closely, Spending Heavily

For the Gulf states, the conflict has had a dual effect. On one hand, the instability has heightened threat perceptions and accelerated procurement. On the other, the widespread civilian casualties and international legal scrutiny have created political sensitivities around some supplier relationships.

GCC governments — drawing inspiration from models provided by China, Russia, and Israel — have been implementing policies and strategies aimed at digital surveillance and mass monitoring for over a decade. The UAE has deployed facial recognition at immigration gates at Dubai International Airport, and installed 12,000 surveillance cameras for the UN’s COP28 summit in December 2023.

The GCC defense market, valued at $39.54 billion in 2024, is expected to reach $54.72 billion by 2030. The procurement focus has shifted notably toward AI-enabled systems, drone technology, and cybersecurity — categories where the Gaza conflict has produced the most visible and rapid innovation.

Saudi Arabia’s Vision 2030 program adds a further dimension: the Kingdom is not merely buying surveillance technology but actively attempting to build a domestic defense industry. Saudi Arabian Military Industries (SAMI) has expanded rapidly, producing electronic devices for military usage, drones, and ammunition. The long-term ambition is to reduce import dependency and develop indigenous AI and surveillance capabilities — a goal that positions Saudi Arabia as a future competitor, not just a customer, in the global surveillance market.

The Corporate Reckoning: Ethics, Employee Protests, and Accountability

The involvement of major technology companies in military surveillance has produced an internal reckoning that shows no sign of resolution. Employee protests at Google, Microsoft, and Palantir have been some of the most visible in the technology industry’s history.

The relationship between surveillance companies and governments in the MENA region continues to be shrouded in secrecy and protected by contractual confidentiality clauses, creating significant barriers to public disclosure. Only five of 23 companies approached in a 2024 Business and Human Rights Resource Centre survey responded to questions about their operations — a response rate that analysts describe as demonstrating “damaging opacity.”

The opacity is not accidental. Surveillance technology contracts are almost universally subject to non-disclosure agreements, and the technical details of AI targeting systems remain classified in most jurisdictions. This creates an accountability gap: systems that make life-or-death decisions at scale operate without the transparency that would be required of equivalent decisions made by human operators.

Despite facing internal protests and human rights campaigns against their continued relationships with defense clients, there has been no indication that major technology companies will be dissuaded from taking these lucrative contracts. Palantir’s stock price has risen sharply since 2023, in part reflecting investor confidence in its defense revenue trajectory.

The Longer Trajectory: What This Conflict Changes

Three structural changes appear likely to persist beyond the immediate conflict.

First, the normalization of AI in targeting decisions is difficult to reverse. Once military institutions have integrated AI recommendation systems into operational workflows and validated their performance under combat conditions, the institutional knowledge and procurement infrastructure required to sustain them becomes embedded. The systems deployed in Gaza will inform the next generation of military AI procurement globally — not only in the Middle East, but in NATO countries, China, and elsewhere.

Second, the “battle-tested” marketing dynamic will intensify. Defense technology companies have historically used conflict exposure as a commercial differentiator. With AI and surveillance systems now central to military operations, the competitive advantage conferred by live-fire validation is significant. Companies that can demonstrate real-world performance in Gaza or elsewhere will have a material advantage in subsequent procurement cycles — creating incentives that are difficult to govern.

Third, the regulatory gap is becoming impossible to ignore. Defense electronics and systems integration spending is expected to grow at 8–9% CAGR through 2028, driven by radar, communications, and surveillance. This growth is occurring largely in the absence of international legal frameworks governing AI in warfare. The Geneva Conventions were not designed for algorithmic kill lists. Existing export control regimes do not adequately cover software systems. The gap between what technology can do and what international law can govern has widened dramatically in the past two years.