Israel ranked as the 27th most suitable market for entrepreneurs, the same position it held last year on the Milken Institute Capital Access Index.
California-based Milken Institute, a nonprofit economic think tank, published its findings on Thursday. The United Kingdom placed in the top position for the first time, having ranked third in 2004. It displaced Hong Kong and Singapore, which each dropped a position to second and third respectively.
Milken said the object of the index is to evaluate the ability of new and existing businesses to access capital around the world.
"The ability to access capital is crucial to entrepreneurship," the report said.
This year's index expands coverage from 88 to 121 countries, representing 92% of global GDP, and measures more than 50 criteria from the strength of banking systems and the diversity and efficiency of financial markets to general economic conditions.
The report attributed the UK's rise to its vibrant equity market, highlighted by lower volatility on the London Stock Exchange and a sharp rise in its number of listings.
The US climbed two places to fourth, followed by Sweden, Denmark, Australia, Norway and Finland. Canada and Ireland tied for 10th.
New Zealand, ranked 14th, had the biggest improvement in score, while Mexico at 43rd and Bulgaria in 53rd had the steepest climb up the ranking, up eight positions each.
On the opposite end, the Philippines and Thailand had the sharpest declines of nine positions each as "Asian countries showed a continued lack of progress in bond market development."
The index, which was started in 1998, is based on the premise that efficient financial markets are key for long-term growth and reducing income polarization.