Follow us on social

Israel's wars mean 'massive' returns for US arms company investors

Israel's wars mean 'massive' returns for US arms company investors

One year after Oct. 7, arms industry stocks way outperformed the S&P 500 index fund

Reporting | Military Industrial Complex

It’s hard to see the past year in the Middle East as anything other than an unmitigated disaster.

Over 41,000 Palestinians have been killed in Gaza by Israel’s nearly yearlong bombardment of the territory, and significant obstruction of food and medicine shipments as a form of collective punishment against the population following Hamas’ October 7, 2023, attack across the border that claimed 1,163 Israeli lives.

But not everyone has been harmed in the rapidly spiraling conflict. Investors in weapons stocks have enjoyed record gains over the past year, dramatically outperforming the major stock indexes in a stock rally that analysts are attributing to violence and instability in the Middle East.

The war has now spread to Lebanon, which Israel invaded last week, and Iran, where Israel assassinated leaders of the IRGC, Hezbollah and Hamas, actions that Iran retaliated against with massive strikes against targets inside Israel.

How Israel pursues its murky war aims in both Lebanon and the Gaza Strip, as well as a promised escalation against Iran, remains to be seen. The Biden administration, having spent the better part of the year promising an imminent ceasefire in Gaza and quietly urging Israel to show greater care for protecting civilian lives, has little to show for its efforts as the U.S. simultaneously continues to provide billions of dollars of weapons to Israel to execute on its rapidly expanding war.

That handout of taxpayer funds to Israel coupled with Israel’s, and global, demand increasing for weapons in a period of instability, has been jet fuel for stock prices.

Lockheed Martin, the world’s largest weapons firm and the manufacturer of the F-35 aircraft that Israel uses in its regular bombings of Gaza, at the close of trading on October 4, has produced a 54.86% percent total return in the one year following the October 7th attacks, outperforming the S&P 500 by about 18%.

Or, put another way, a $10,000 investment in the F-35 manufacturer right before the October 7 attacks would, one year later, have produced a $5,486 total return. A similar investment in an S&P 500 index fund would have produced only $3,689.

The weapons profits weren’t limited to Lockheed.

The second largest weapons firm, Raytheon, provides “bunker buster” bombs to Israel, weapons that are prohibited for use in areas with high civilian populations. Israel has repeatedly used these weapons in high density areas in both Gaza and Lebanon, producing high civilian casualties.

Demand for these weapons and others have driven up Raytheon’s stock price and generated massive returns for investors. Raytheon’s total return for investors in the past year is 82.69%, outperforming the S&P 500 by about 46%. A $10,000 investment in Raytheon before the October 7 attacks would have produced a $8,269 total return.

Another producer of bunker busters, General Dynamics, which produced the BLU-109 bombs used by Israel to assassinate Hezbollah leader Hassan Nasrallah in Beirut and leveled multiple residential buildings in the process, enjoyed smaller gains but still returned a 37% total return for investors, beating the S&P 500 by over 3%.

While profiting off war may be distasteful for some, defense analysts at major investment banks grilled weapons executives in earnings calls last October about how the companies, and their investors, might profit from the war in Gaza.

“Hamas has created additional demand, we have this $106bn request from the president,” said TD Cowen’s Cai von Rumohr, during General Dynamics’earnings call on October 25, 2023. In a question posed to General Dynamics executives on the call, von Rumohr asked, “Can you give us some general color in terms of areas where you think you could see incremental acceleration in demand?”

One year later, those analysts have been proven correct and Israel’s war grinds on as the White House finds its bids for ceasefires repeatedly rejected while, in seeming contradiction, supplying Israel with the weapons to continue fighting.

On September 26, the White House approved a $8.7 billion aid package for Israel that will largely be spent on munitions and armaments from major weapons firms, bringing the total U.S. security assistance to Israel since October 7 to nearly $18 billion. The same day, Israel, in defiance of the U.S., rejected a call for a ceasefire with Hezbollah, no doubt driving “incremental acceleration in demand” for weapons.


Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., August 8, 2024. REUTERS/Brendan McDermid

Reporting | Military Industrial Complex
Volodymyr Zelensky at the Munich Security Conference
Top photo credit: Volodymyr Zelensky at the Munich Security Conference 2/15/25 (MSC/Angelika Warmuth.)

Munich Dispatch: Zelensky calls for an 'Army of Europe'

Europe

MUNICH, GERMANY — During his keynote speech at the Munich Security Conference today Ukrainian President Volodymr Zelensky repeated the need for a “European army” — also framed as “an Army of Europe.”

What this specifically means is unclear, but the Ukrainian leader delivered the message home, if we are to judge by the headlines of the main European newspapers this afternoon. Zelensky tried to further raise the stakes by saying that Ukraine has intelligence that next summer Russia plans to send troops to Belarus. On that, he noted: “Is this Russian force in Belarus meant to attack Ukraine? Maybe, or maybe not. Or maybe it's meant for you. Let me remind you, Belarus borders 3 NATO countries.”

keep readingShow less
Munich Dispatch: Vance lectures Euros on democracy & tolerance
Top photo credit: MSC/Lennart Preiss

Munich Dispatch: Vance lectures Euros on democracy & tolerance

Europe

MUNICH, GERMANY — The Munich Security Conference started this Friday in a city recovering from an attack in which a suspect drove his car into a crowd of people, leaving 36 people injured on Thursday morning.

The international meeting also takes place against the backdrop of the German parliamentary elections on Feb. 23. Friedrich Merz, the chancellor candidate of the center-right Christian-Democratic Union (CDU) — which comfortably leads the polls with around 30% of support — could be spotted in the first row of the conference hall. Merz held a short meeting with United States Vice President J.D. Vance earlier in the day.

keep readingShow less
'People-centered peace' lost a major advocate this week
Top photo credit: Screenshot TRT World (6/5/23)

'People-centered peace' lost a major advocate this week

Europe

On February 12, President Trump revealed he had talked to Putin about a peace deal in Ukraine, and Defense Secretary Hegseth gave a speech about what a peace settlement would not entail (NATO membership, US protection, return of occupied territories).

This left Ukrainians reeling with feelings of betrayal and being steamrolled, while European leaders looked shellshocked at finding themselves sidelined. I thought the right moment had arrived to finally write a long-planned article, on inclusive, people-centered peace-making, with my co-author Wolfgang Sporrer.

keep readingShow less

Trump transition

Latest

Newsletter

Subscribe now to our weekly round-up and don't miss a beat with your favorite RS contributors and reporters, as well as staff analysis, opinion, and news promoting a positive, non-partisan vision of U.S. foreign policy.