The financial gains from conflicts such as the war on Lebanon highlight the influence of defense contractors on foreign policy and military strategies globally.
Ali Noureddine
This article was translated from Arabic to English
Wars across the globe have long been tied to the interests of major Western defense contractors, which explains these companies’ interest in forming powerful lobbies within political decision-making centers. War, military preparation and deterrence mechanisms serve as the primary drivers of demand, consuming the production and supply of these defense contractors.
Simultaneously, war acts as a marketing tool to showcase the efficiency and effectiveness of military hardware, further boosting demand. As a result, fluctuations in the stock prices of major defense contractors are often seen as being directly correlated with military developments involving their products.
Israel’s ongoing war on Lebanon is no exception. As soon as signs of the conflict’s escalation emerged in September 2024, several Western and Israeli defense contractors saw sharp increases in their stock prices, highlighting which companies stood to benefit most from the war and their existing contracts with the Israeli military.
Two key events revealed Israel’s intention to escalate the conflict: the Israeli airstrike on September 20, 2024, which targeted Hezbollah’s Radwan Force leadership, and the assassination of the group’s Secretary-General Sayyed Hassan Nasrallah on September 27, 2024.
U.S. and Israeli Defense Contractors
The market data indicates that shares of U.S. company Lockheed Martin experienced significant and rapid growth, rising from $565.18 prior to the raid on the Radwan Force Command to $605.86 by early October 2024, following the expansion of the war in Lebanon. This 7.1 per cent increase over a span of less than two weeks is strongly tied to the ongoing conflict in Lebanon.
Lockheed Martin’s connection to the events in Lebanon is evident, as the company manufactures the F-16 and F-35 fighter jets, which Israel is heavily deploying in its military operations. Additionally, the company supplies spare parts and missile systems for these aircraft.
Given this, the expansion of the conflict is expected to drive further demand for Lockheed Martin’s products, particularly munitions being used daily by the Israeli Air Force.
It is also worth noting that Lockheed Martin produces other weapons used by the Israeli military in Lebanon such as Hellfire missiles and advanced missile-guidance technologies. The company recently raised its revenue forecast for 2024 to $71 billion, a revision attributed to the protracted conflicts in both the Middle East and Ukraine.
During the same period, shares of Israeli defense company Rafael surged by nearly 12 per cent, despite Hezbollah’s repeated missile attacks on the company’s facilities in northern Haifa. Rafael is the primary manufacturer of several key weapons systems currently being used by the Israeli military, including the Spice 2000 smart missiles.
These missiles gained notoriety for their role in heavy bombardments of Beirut’s southern suburbs, including an airstrike reportedly targeting Nasrallah.
In contrast, shares of Northrop Grumman, another U.S. defense contractor, saw a more modest 4.2 per cent increase. While relatively smaller, this gain reflects the company’s strategic importance, as it produces munitions and equipment for the Israeli Air Force’s Apache helicopters, as well as radar and satellite surveillance systems employed in Israel’s military operations.
Similarly, shares of RTX Corp. rose by 5 per cent in the period between the assassination of the Radwan Force leaders and early October. Investors anticipate increased profits for RTX, which specializes in manufacturing munitions for the Iron Dome system, a key component of Israel’s defense against short-range rocket attacks.
In November 2024, U.S. aerospace company Boeing emerged as one of the key beneficiaries of escalating geopolitical tensions in the Middle East, securing a $5.2 billion contract to supply Israel with 25 F-15 fighter jets, with an option for Israel to purchase an additional 25.
These advanced fighters, designed for long-range strike capabilities, have a flight range exceeding 2,222 kilometers, signaling their potential use in Israel’s strategic preparations. Analysts suggest the deal may be tied to Israel’s readiness to address future threats from Iran, following a series of direct confrontations between the two nations in recent times.
The Interests of European Governments and Defense Contractors
Since the onset of the war in Gaza in October 2023, many European governments have sought to distance themselves from media accusations of supplying arms to Israel.
For instance, German Foreign Minister Annalena Baerbock described her country’s arms supplies to Israel as “problematic,” citing concerns over potential violations of international law.
Similarly, the British Foreign Office announced the suspension of certain arms export licenses to Israel for the same reasons. France also made headlines when it temporarily banned Israeli companies from participating in the Euronival naval arms fair, a decision that was later overturned by French courts.
Nevertheless, the deep-seated interests between Israel, European governments and defense contractors in the arms industry remain significant.
For example, as the conflict in Lebanon escalated in late October 2024, the German Defense Ministry rolled out the first Leopard 2 tank equipped with the Trophy protection system, which is developed by Israeli defense company Rafael. This marked the beginning of Germany’s plan to outfit its tank fleet with the Israeli system, a project that had been stalled for over four years.
By proceeding with this contract, Germany is directly contributing to the profits of one of Israel’s leading defense firms, thereby enabling the company to advance its projects amid the ongoing conflict.
Data from the German Foreign Ministry also revealed that Berlin approved military exports to Israel totaling $100 million in the three months leading up to the Lebanon war. These exports primarily included spare parts for Israeli Merkava tanks and ammunition for Howitzer cannons, produced by the German company Rheinmetall.
Despite recent diplomatic tensions between France and Israel, French defense companies continue to play a critical role in Israel’s military supply chain. Safran, a major French firm, provides key components for Hermes drones, which are produced in collaboration with Israeli company Elbit. These drones are crucial to Israel’s round-the-clock surveillance of Lebanese airspace.
Notably, Safran’s stock price surged by 8 per cent between early September 2024 and September 27, the day of Nasrallah’s assassination. Other French firms, such as Dassault, also maintain significant contracts with the Israeli military, supplying drones, air surveillance systems and missile guidance equipment.
In the U.K., over 500 companies are involved in manufacturing components for the F-35 fighter jet, of which Israel is a prominent user in its current operations in Lebanon. These companies provide around 15 per cent of the aircraft’s parts. In November 2024, declassified shipping documents revealed that the U.K. not only approved the export of spare parts for these jets but also facilitated their transport via British military bases.
The intertwined interests of defense companies and the arms industry have become a key factor shaping Western foreign policies, including their stance on conflicts. The influence of defense industry lobbies on government decisions has been a subject of recurring discussion. For Israel, these ties have made it a primary consumer of military production, particularly as it engages in multiple, simultaneous conflicts.