Defense Stocks in Focus as U.S. Sanctions Arms Sale to Israel
Per major media sources, the U.S. administration has recently approved the potential sale of precision-guided weapons worth $735 million to Israel. Surprisingly, the news comes at a time when violent conflicts between Israel and Palestine have entered the second week and continue to intensify each day, highlighted by the exchange of Israeli airstrikes and Hamas rockets assaults.
Has U.S. Support Strengthened Israel’s Military Prowess?
The United States, for over a long period of time, has been Israel’s most important ally in combat in the Middle East region. Notably, the United States' commitment to boosting Israel’s defense structure is further evident from the ten-year, $38-billion Memorandum of Understanding (MOU) signed between the countries in 2016. Under the MOU terms, the United States pledged to offer military aid worth $3.3 billion in Foreign Military Financing and $500 million for cooperative programs for missile defense, each year.
In addition to defense and security assistance, the United States participates in a variety of exchanges with Israel, including joint military exercises, research, and weapons development.
Boeing Likely to be a Primary Beneficiary
Per the Washington Post, the latest approval of potential weapon sales to Israel includes the Joint Direct Attack Munitions and GBU-39 small diameter bombs, which are developed by The Boeing Company BA. In February 2021, the Israeli ministry of defense signed a letter of acceptance (LOA) for Boeing’s two KC-46 in-flight refueling tankers. Prior to Israel signing the LOA, the U.S. Department of State gave approval to Israel to buy up to eight KC-46 aircraft and related equipment for an estimated cost of $2.4 billion in March 2020.
So, we may expect Boeing’s defense business to witness huge growth backed by the latest Israeli-Palestinian conflict, which is poised to prolong according to some Israeli military personnel.
Other Stocks Poised to Gain
Alongside Boeing, other major U.S. defense stocks, with a strong presence in Israel, have solid growth opportunities, given the dispute between Israel and Palestine.
Lockheed Martin LMT offers its C-130 and F-16 aircraft to Israel, which have been used by the Israel Air Force since the 1970s and 1980s. Israel is the owner of the largest fleet of F-16 fighters outside the United States. Earlier in 2021, Israel selected Lockheed Martin’s heavy-lift CH53K to be its new transport helicopter. Moreover, the nation has placed orders for 50 F-35s to date and also received half of the jets.
Raytheon Technologies’ RTX Missiles & Defense unit and Israel’s Rafael Advanced Defense Systems are jointly manufacturing Iron Dome Missile Defense Systems. The system is widely fielded in Israel where ten Iron Dome batteries protect the citizens and infrastructure of Israel, with each battery comprising three to four stationary launchers, 20 Tamir missiles and a battlefield radar. Raytheon and Rafael Advanced Defense Systems also co-manufacture David’s Sling System, which forms a crucial element of Israel’s multi-tier layered missile defense architecture to provide mid-tier regional missile defense.
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