Wall Street has started to weigh in on the impact of the Israel-Hamas war on U.S. defense stocks. Analysts all feel similar: The war isn’t a large direct benefit, but it can be a positive catalyst for the sector.
The rise reflected growing geopolitical uncertainty. That generally means higher defense stocks. Conflict also means more sales for the sector as munitions get used up, and equipment is compromised and worn down. J.P. Morgan analyst Seth Seifman wrote Wednesday that the direct impact of the Israeli-Hamas conflict on defense contractors is small. “Outperformance on Monday likely reflected positioning: Defense stocks were/are under-owned or shorted,” wrote the analyst. “Middle East violence may push the House to act faster in electing a Speaker and garner support for budget. The attacks also increase the likelihood of a broader war, though stocks are not pricing this in.
UBS analyst Gavin Parsons launched coverage of the sector on Tuesday evening, amid all the turmoil. He didn’t address Israel directly but wrote that bipartisan support for national security would persist in Washington.