Global economy continues to face risks and challenges as a result of renewed inflation shock due to a war between Israel and Hamas. Experts believe that there is a growing concern regarding the significant increase in oil prices. These experts opined that the conflict threatened to further impact fragile global outlook because world’s leading central banks are battling with higher inflationary pressures as a result of Covid-19 pandemic and war in Ukraine. In this article, we will study which country’s companies profit most from the war.
Oil prices saw a significant increase over past couple of sessions, with commodity reaching ~$93 a barrel. This was because traders reacted to prospect of an escalating war, after a blast at one of the Gaza hospitals during Joe Biden’s 1-day visit to Israel. There are certain risks of renewed energy supply shock. Figures from UK which were published recently exhibited that annual inflation rate unexpectedly was steady in September post a significant increase in fuel costs.
Wall Street chiefs are worried regarding the global economy’s state and impact of escalating war between Israel and Hamas. Even though these worries continue to loom, Saudi Arabia reassured global investors that the nation is an attractive investment destination. While Middle East conflict continue to raise uncertainties, there are country’s companies profit most from the war.
With this in mind, let us now check which country’s companies profit most from the war?
Head of Saudi Arabia’s $760 billion sovereign wealth fund, Yasir Al-Rumayyan highlighted his nation’s some of the recent achievements, which consists posting a healthy growth of world’s 20 leading economies in 2022. With significant oil revenue, Saudi Arabia together with neighboring United Arab Emirates have been categorized as an important source of capital in the world where nations still try to cope up with impact of increased interest rates, aftermath of the Covid-19 and unrest in Ukraine and Gaza.
There are companies who are providing arms to either of the two parties. Such renowned and mega enterprises saw significant increase in orders and revenues and they have cashed in big bucks from the top conflicts and wars.
Lockheed Martin, Northrop Gruman and Huntington Ingalls are some leading defense manufacturers in the United States which have seen a rise of 8% in their stock prices since Israel-Hamas conflict has surfaced in the news.
Higher stock prices of these firms persuaded Wall Street to shift focus on entire defense industry. Stock prices of such companies have shown a significant improvement because of Israel’s renewed interest in buying more and more weapons from the United States. The country already is fetching ~$3.8 billion worth of military aid from the United States. Experts believe that this might increase after Hamas assault.
Earlier, Russia-Ukraine conflict helped European Defense stocks in touching new heights as governments decided to purchase new weapons stock to provide to Ukraine. There are several theories that such wars are encouraged for businesses like these to cash in millions and billions.
Energy sector saw a similar but modest increase in value. West Texas Intermediate crude went up by ~4.3% while in the UK, Shell Plc and BP Plc have gone up by over ~2% in their values. This effect seems to be international, mainly in Western Market, prompted by the conflicts going between Israel-Hamas and Russia-Ukraine.
If we talk about Russia-Ukraine, the war led to higher defense spending in Europe and the US (reaching $842 billion). However, this battle appears to have descended into the sudden shadow of the current Israel-Hamas conflict. The United States poured up to ~$37.6 billion war support to Ukraine. This kind of amount was never received by Ukraine before in its entire history. Therefore, undoubtedly, the companies operating in the United States are benefitting from the war. While this country’s companies profit most from the war, there are new entrepreneurs entering the market and testing their set of products.
Blake Resnick, who is ~23 years old, is the US entrepreneur who got ~$100 million by firstly donating and then selling certain set of drones to Ukraine. Therefore, experts say that battlefield in Ukraine became a potential testing ground for several new and budding electronic warfare technology.
Future of defense and arms industry appears to be bright and promising since countries all over the world continue to increase their defense budgets. In East, the West and its allies focus on preparing impending conflict which is expected to be bigger than the ones that are presently currently happening i.e., China’s invasion of Taiwan.
With the increased uncertainties in the global economy, there are defense firms which continue to make huge profits.
Lockheed Martin Corporation, who is the largest defense contractor globally, released 3Q earnings. The company’s 2023 net sales came in at $16.9 billion in comparison to $16.6 billion in 3Q22. Net earnings in 3Q were $1.7 billion, or $6.73 per share against $1.8 billion, or $6.71 per share, in 3Q22. Cash from operations came in at $2.9 billion in 3Q23 against $3.1 billion in 3Q22.
The company’s 3Q results were at or above its expectations throughout the board, making $2.5 billion of FCF, with ~100% returned to shareholders in the form of dividends and share repurchases. Backlog of the company remained strong at ~$156 billion as both domestic and international orders continue to accelerate.
For FY24, the company will focus on pursuing its strategy of building capacity, efficiency and resilience into production operations. This should help in enabling advanced digital technologies to improve integrated deterrence through collaboration with its customers and tech and aerospace industry partners. Therefore, the company might see expansion of its international business and operations.
This strategy should help in achieving growth in its traditional platforms and systems, further supported by digital service revenues over time. Collectively, all these processes are expected to support its dynamic capital allocation process to the shareholders.
For FY23, the company expects net sales in the range of ~$66,250 million – $66,750 million and diluted EPS of between ~$27.0 – $27.2. Cash from operations of the company is expected to come at ~$8,150 million.