Last updated on November 4th, 2023 at 10:00 pm

Opinion: In times of conflict, the world often focuses on the immediate and profound human suffering caused by wars. However, it’s essential to acknowledge that wars, tragically, have economic beneficiaries as well. The Israel-Hamas War is no exception. As we delve into this unsettling relationship between armed conflict and the defense industry, we find that there are clear winners amidst the chaos and destruction.

Opinion

When we talk about beneficiaries in this context, it may sound paradoxical. After all, it’s a war, a situation rife with human suffering and geopolitical tensions. But it’s crucial to recognize that wars drive demand for weapons and technology, and the defense industry seizes this opportunity to increase its profits.

Wars are prolonged and intense ones, result in increased defense spending. This increase demand for weapons, technology. And it provides a infrastructure boost to defense companies worldwide, causing their stocks to rally. Consider the recent example of U.S. defense stocks, which saw a substantial increase in market value since the war began. Northrop Grumman surged by 12%, General Dynamics jumped by 9%, Lockheed Martin gained 8%, and Raytheon Technologies (RTX) rallied by 4%. This trend can be expected to continue as the U.S. plans to send more weapons to Israel in the coming days.

Lockheed Martin, for instance, manufactures the F-35 fighter jets which used by the Israeli military, as well as Blackhawk helicopters. Northrop Grumman produces combat vehicles, all of which are vital for Israel’s defense and are expected to see increased demand in the near future.

This situation is not new to the Israel-Hamas War. We have witnessed it in past conflicts. Notably, two defense stocks received a significant boost when Russia invaded Ukraine. The US has allocated over $40 billion in military aid to Ukraine, making American defense sector one of the biggest beneficiaries.

The harsh reality is that, whether we like it or not, wars have dual consequences. While they cost lives and inflict human suffering, they also stimulate economic activity. Wars fuel job creation, bolster sales, and, in some cases, enhance local economies.

This raises complex moral and ethical questions. Are we, in essence, profiting from human suffering? Does this economic incentive inadvertently encourage the prolongation of conflicts? Furthermore, there is the investor dilemma. Defense stocks are often labeled as “sin stocks” or “warmonger investments.” However, during times of war, these stocks become highly attractive to investors due to their substantial surges in value.

At present, the world is grappling with two significant wars – The Ukraine conflict and The Israel-Hamas War. The defense spending trend is already on the rise. Europe is witnessing the highest military spending since the Cold War. And here in  Asian nations, such as Japan, South Korea, and India, they are significantly increasing their defense budgets. Globally, military spending accounts for 2.2% of the world’s GDP, totaling $2.24 trillion. Unfortunately, the chances are that this figure will only rise in the days ahead.