Middle East Tensions Escalate: Defense Stocks Surge Amid Hamas Attacks
October 10, 2023
Tension Escalates in the Middle East
A severe weekend assault by Hamas has intensified tensions in the Middle East, with over 900 Israelis dead and a staggering 2,800 injured. As a reaction, Israel has seized control of its border with Gaza and notably increased airstrikes, leading to a significant count of casualties. Coupled with a total blockade on the Strip, more than 100 Israeli civilians, which include women and children, remain captive in Gaza. These captives face severe execution threats from Hamas, which persists launching rocket attacks into Israel, firing thousands within days.
Leaders React to the Rising Crisis
Israel’s Prime Minister, Bibi Netanyahu has overtly condemned Hamas’s actions. In a national address, he compared these actions to ISIS’s brutality. Netanyahu also assured that Israel’s counteractions will leave an enduring “impact” on its adversaries. Meanwhile, Israel’s military rapidly mobilized an imposing force of 300,000 reservists. Also noteworthy was the Pentagon’s stern warnings towards Iran and Hezbollah – a Lebanese terrorist group – suggesting they reassess escalating the conflict further.
Markets React as Defense Stocks Soar
Defense stocks saw considerable growth on Monday amidst these advancements; this coincided with US commencing munitions supply to Israel. The top five performing stocks included“Northrop Grumman (NOC), L3Harris (LHX), Huntington Ingalls (HII), Lockheed Martin (LMT) and General Dynamics (GD)” during the S&P 500 session. Additionally, Chiming with these events, the US deployed the USS Gerald Ford aircraft carrier, alongside other military vessels to the eastern Mediterranean in a display of support for Israel and ensuring its regional interests. Despite an initial dip, WTI crude oil (CL1:COM) ended at a significant $86/bbl. Coinciding with recent Federal Reserve policy remarks, American stock indices picked up pace while Treasuries enjoyed their best day since March.
Economic Effect and Intervention Efforts
The ongoing crisis has caused the Israeli currency’s value to plummet significantly to a seven-year low against the US dollar, prompting intervention from the Bank of Israel. The bank sold up to $30B in dollar reserves and $15B via swaps markets, aiming to inject necessary liquidity and maintain stable exchange rates. Economists suggest that due to Israel’s viable local economy, it can withstand war impacts for over eight weeks. Bob Savage of BNY Mellon predicts that current affairs differ remarkably from the 1973 Yom Kippur War and subsequent oil crisis due to diverse political shifts including ties with Egypt and UAE, extensive natural gas reserves along with healthy budgetary standing signifies that Israel possesses capabilities of bearing war-related costs.