Military contractor stocks have skyrocketed since Israel war started
Shares of some of the U.S. biggest military contractors have soared since the beginning of Israel's war against Hamas, with companies such as Lockheed Martin reporting a 10 percent increase in their stock values.
The war between Israel and Hamas started after the Palestinian paramilitary group launched an unprecedented attack by land, sea, and air on Israel on October 7, catching Israeli intelligence by surprise.
The attack killed at least 1,300 Israeli civilians and soldiers and saw at least 150 people being kidnapped by Hamas militants. Afterwards, Israel declared war against Hamas and started heavily bombing Gaza. The enclave's authorities said that death tolls in Gaza City had reached 2,670 by Monday.
The attack and the following war have sent the stocks of American defense companies soaring. Raytheon Technologies were valued at $69.77 on Friday, October 6, one day before the Hamas' attack, but surged to $73.35 by October 10. The stock prices had slid down to $73.35 as of Monday, October 16, according to data from Google Finance.
Military contractor stocks see huge spike
The attack and the following war have sent the stocks of American defense companies soaring. A look at the past month of stock prices for key defense contractors:
Stocks for Boeing were valued at $187.38 on October 6 and had surged to $195.13 by Wednesday, before sliding down to $184.91 on Monday. Those for Lockheed Martin were valued at $400.73 on October 6 and, as of Monday October 16, were worth $443. On October 10, Barron's investment magazine reported that the company had added $23 billion to its market capitalization after Hamas' attack.
General Dynamics' stocks were worth $219.94 on October 6 and $243.04 on October 16. Those for Northrop Grumman were valued at $423.24 on October 6, but $490.15, just 10 days later, on Monday.
Lockheed Martin and Northrop Grumman reported the strongest stock gains in more than three years, Forbes reported. The news outlet added that analysts say the trend wasn't expected to last.
While these gains in the stocks of defense contractors spike after big events such as the Hamas' attack, when Wall Street suddenly focuses on the security industry, "history shows [...] those increases generally stall and are not sustainable," Bernstein analysts led by Douglas Harned wrote in a note to clients on October 11.
Russia's invasion of Ukraine represents a clear example and precedent in this case. In the first week of trading after the war between the Russians and Ukrainians began on February 24, 2022, the iShares defense ETF surged by 5 percent. Shares for Lockheed Martin and Northrop Grumman rose by as much as 20 percent, according to Forbes. However, in the following six months, despite the war still being ongoing amid the counteroffensive by Ukraine, the value of the sector had dropped by nearly 20 percent.