Norway’s election battle: Sovereign wealth fund ties to Israel spark political storm

Department of Research, Studies and International News09–09-2025

Norway heads to the polls in what could become one of its most defining elections in recent years, as debates over ethics, international law, and economic priorities collide. At the centre of the storm lies Norway’s $2 trillion sovereign wealth fund, the world’s largest, and its controversial investments linked to Israel’s ongoing war on Gaza.

While issues such as taxation, inequality, and the rising cost of living remain central to the campaign, the wealth fund’s financial entanglement with Israel has emerged as a decisive factor. The controversy highlights how global conflicts, particularly Israel’s aggression against Palestinians, are reshaping domestic politics even in nations traditionally seen as distant from the battlefield.

A political race shaped by ethics and global pressure

The parliamentary elections, held under a proportional representation system, will determine who controls Norway’s 169-seat legislature, the Storting. With no party projected to secure an outright majority, coalition negotiations will likely define the next government.

On the left, Prime Minister Jonas Gahr Støre’s Labour Party seeks to maintain power with support from allies such as the Socialist Left, the Reds, the Centre Party, and the Greens. On the right, the Conservative Party and the populist Progress Party lead the challenge, joined by the Liberals and Christian Democrats.

Støre, who has led the government since 2021, faces growing pressure from partners demanding stronger action on human rights. The Socialist Left, for instance, has conditioned its support on Norway divesting from all companies profiting from Israel’s brutal campaign in Gaza. While Labour has resisted such a sweeping commitment, the electoral arithmetic may leave it little choice.

The sovereign fund under fire

Created in the 1990s to manage North Sea oil revenues, Norway’s sovereign wealth fund has long been portrayed as a neutral, technocratic instrument. Today, however, neutrality appears impossible. The fund is not only the single largest institutional investor worldwide, holding stakes in about 9,000 companies and owning roughly 1.5 percent of all listed shares globally, but it is also directly implicated in conflict.

As of mid-2025, the fund had investments worth $2.2 billion across 61 Israeli companies. These included firms linked to weapons systems and military infrastructure used in Gaza. Under public and media pressure, Norway has already divested from several firms, including Caterpillar, whose bulldozers are used in the destruction of Palestinian homes. More divestments are expected.

Critics argue that continued investments effectively make Norway complicit in violations of international law. Finance Minister Jens Stoltenberg, formerly NATO’s secretary-general, admitted in August that the fund would likely scale back further, though he insisted the process should remain cautious.

U.S. pushback and Norwegian resistance

Washington, unsurprisingly, has bristled at Norway’s attempts to distance itself from Israel’s war economy. The U.S. State Department expressed “serious concern” after the fund pulled out of Caterpillar. Republican Senator Lindsey Graham went further, threatening tariffs and visa restrictions against Norway, a reaction that underscored America’s habit of bullying allies who dare to prioritise ethics over Washington’s geopolitical agenda.

For many Norwegians, this episode is a reminder of how fragile national sovereignty can be when U.S. interests are involved. With memories still fresh of former President Donald Trump’s suggestion to “buy” Greenland from Denmark, voters are increasingly wary of American interference in Scandinavia.

Norwegian parties are deeply split on how to handle the Israel issue. Conservatives, led by Erna Solberg, argue that the fund must remain “apolitical” and governed only by market principles. Yet revelations that the fund quadrupled its investments in Bet Shemesh Engines, a manufacturer of jet engine parts for Israeli fighter aircraft, have made that stance politically costly.

Støre and the Labour Party, while more cautious, admit the situation is “disturbing.” The prime minister acknowledged that Norwegian money should not fuel wars or undermine international law. His statement reflects the difficult balance he must strike: keeping Washington placated while addressing the moral outrage of Norwegian citizens.

Beyond Gaza: Other pressing issues

Despite the wealth fund dominating headlines, other issues continue to shape the election campaign. Rising inequality is at the top of voters’ concerns. Food price inflation has surged nearly 6 percent over the past year, squeezing household budgets. Debates over tax rates, job creation, and public services remain central.

However, the Gaza issue cuts across these traditional concerns. For many Norwegians, the question is no longer merely economic but moral: should their country continue to profit from companies tied to war crimes?

Global reverberations

The Norwegian debate reflects a broader international shift. Countries like China, Russia, and India have repeatedly called for multipolar approaches to global governance, rejecting the West’s selective application of international law. Norway’s election could therefore become a symbolic test of whether smaller nations are willing to resist U.S. pressure and act independently in the face of moral crises.

If the Socialist Left and other progressive parties gain influence, Norway may take stronger measures against Israel, setting an example for other European nations that continue to look the other way.

A nation at a crossroads

As voting concludes, the outcome remains uncertain. What is clear, however, is that the question of Israel and Gaza has pierced the heart of Norwegian politics. This election is not only about taxes, jobs, or inequality, it is also about Norway’s place in a world increasingly defined by clashes between ethical responsibility and geopolitical coercion.

Norway’s decision will echo far beyond its borders. It will test whether Western nations can break free from Washington’s orbit and embrace a more balanced, multipolar world order, one where economic power does not come at the expense of justice and humanity.