It is difficult to describe the ongoing situation in Gaza over the past year as anything other than a devastating catastrophe. More than 42,000 Palestinians have been killed due to Israeli bombing, with over 80,000 injured, primarily women and children. A continuous displacement of Gaza’s 2.2 million residents has also occurred, compounded by a severe obstruction of food and medical supplies as a form of collective punishment. This follows Hamas’ cross-border attack on October 7, 2023, which resulted in the deaths of 1,163 Israelis, including 311 soldiers, according to official Israeli reports.
However, not everyone has suffered in the rapidly escalating conflict. “Investors in arms stocks have enjoyed record profits over the past year, significantly outperforming major stock indices, with analysts attributing this rise to violence, instability, and wars in the Middle East,” according to researcher Eli Clifton, who tracks record sales for the U.S. military-industrial complex.
The war has now expanded to Lebanon, which Israel invaded last week, and Iran, where Israel assassinated leaders of the Iranian Revolutionary Guard, Hezbollah, and Hamas. In response, Iran launched major strikes against Israeli targets, raising expectations of even more destructive Israeli retaliation against Iran.
It remains unclear how Israel will continue to pursue its vague war objectives in Lebanon and Gaza, as well as the promised escalation against Iran. The Biden administration, which has spent much of the year quietly urging Israel to show more concern for civilian lives, has little to show for its efforts. Meanwhile, the U.S. continues to provide billions of dollars in arms to Israel to fuel its rapidly expanding war.
This taxpayer-funded aid to Israel, coupled with growing Israeli and global demand for arms in a time of instability, has fueled soaring stock prices for U.S. defense companies.
Lockheed Martin, the world’s largest arms company and manufacturer of the F-35 aircraft used by Israel in its regular bombings of Gaza, closed trading on October 4 with a total return of 54.86% over the year following the October 7, 2023 attacks, outperforming the S&P 500 index by about 18%.
Clifton explains this by stating, “In other words, a $10,000 investment in the manufacturer of F-35 aircraft just before the October 7, 2023 attacks would have yielded a total return of $5,486 after one year, whereas a similar investment in an S&P 500 index fund would have generated a total return of just $3,689.”
The profits from arms were not limited to Lockheed. Raytheon, the second-largest arms company, supplies Israel with bunker-busting bombs, weapons prohibited for use in highly populated civilian areas. Israel has repeatedly used these weapons in heavily populated areas of Gaza (and now Lebanon), killing tens of thousands of civilians.
“The demand for these weapons and others has driven Raytheon’s stock price higher, generating massive returns for investors,” says Clifton. Raytheon investors saw a total return of 82.69% over the past year, outperforming the S&P 500 by about 46%. A $10,000 investment in Raytheon before the October 7 attacks would have yielded a total return of $8,269.
Another producer of bunker-busting bombs, General Dynamics, which made the BLU-109 bombs used by Israel to assassinate Hezbollah leader Hassan Nasrallah in Beirut, destroying numerous residential buildings in the process, posted smaller gains but still returned a total of 37% to investors, outperforming the S&P 500 by over 3%.
While profiting from war may be distasteful to some, defense analysts from major investment banks questioned arms executives during earnings calls in October 2023 about how companies and their investors could benefit from the war in Gaza.
Kay von Romer of TD Cowen, during a call with shareholders (according to the Wall Street Journal), referred to General Dynamics’ October 25, 2023 earnings, saying, “Hamas has created additional demand, and we have a $106 billion order from President Biden,” in response to a question directed at General Dynamics executives during the call, “Can you give us some broad details about areas where you expect to see accelerated demand growth?”
A year later, the analysts’ predictions proved accurate, and Israel’s war continues as the White House’s attempts to broker a ceasefire are repeatedly rejected, while Washington continues to provide Israel with weapons to continue the fighting, in stark contrast to the goal of a ceasefire. On September 26, the eve of Hezbollah Secretary General Hassan Nasrallah’s assassination, the White House approved an $8.7 billion aid package to Israel, most of which will be spent on munitions and weapons from major defense companies, bringing the total U.S. security assistance to Israel since October 7 to nearly $18 billion.
On the same day, Israel defiantly rejected a U.S. call for a ceasefire with Hezbollah, undoubtedly leading to a “gradual acceleration in demand” for weapons.
According to Brown University’s “Costs of War” project in a research paper published Monday, U.S. support for Israel’s war on Gaza and other escalations in the Middle East have cost the United States at least $22.76 billion since October 7, 2023.
The war’s cost was conservatively estimated by combining the cost of U.S. military aid to Israel with the cost of U.S. military operations in the region, including the war against the Houthis in Yemen.
The report found that the U.S. government approved at least $17.9 billion in military aid to support Israeli military operations in Gaza and elsewhere in the region over the past year, a figure far larger than any other year since the U.S. began providing military aid to Israel in 1959.
The report notes the difficulty of tracking U.S. military support for Israel due to the Biden administration’s lack of transparency. “For example, the Biden administration has signed at least 100 arms deals with Israel since October 2023, which were below the threshold that would have required congressional notification of the details,” the paper states.
Courtesy: Al Quds
