European Defence Stocks Rise After Surprise Attack on Israel

The military conflict has sent shockwaves through financial markets, sending defence stocks sharply higher in Europe, but Tel Aviv Israel's blue-chip index has fallen significantly

Ollie Smith 9 October, 2023 | 9:41AM
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Israel soldiers

European defence stocks rose almost universally on Monday morning after the Israeli government announced that citizens should evacuate Gaza following an organised attack by Hamas at the weekend.

European defence stocks have risen in response to this significant escalation of violence in the Middle East. At the time of writing on Monday morning, Rheinmetall shares were up 5.7%, BAE Systems shares were up 4.2%, while Italy's Leonardo was up 5.7%. Other giants have followed suit. Dassault Aviation is up 4.5%, while Thales is up 4.6%.

In the UK, the FTSE 100 has remained steady, supported by oil giants Shell and BP.

"As it nearly always does, an escalation of tensions in the region has helped push up oil prices. This is inevitable given how much of the world's crude reserves and production are centred there," said AJ Bell investment director Russ Mould.

"One rare energy stock not benefiting from higher prices was Energean, which is developing a substantial gas field in offshore Israel and is therefore right at the heart of the current uncertainty."

In Tel Aviv, meanwhile, Israel's TA-35 index has fallen significantly. This morning it is down 0.3%, but that follows a 4.8% drop yesterday as investor pessimism hit blue-chip companies.

'Our 9/11'

On Saturday morning Hamas fighters launched what has been described as a co-ordinated assault on several civilian sites – one of which was the Supernova music festival in the Negev desert near Kibbutz Re'im. The death toll is not yet confirmed but Israeli authorities say over 600 people have died as a result of the initial offensive.

Over the weekend pictures and video posted online also purported to show atrocities committed by Hamas militants against civilians, Israeli citizens, and Jewish families.

An Israeli lieutenant colonel, Jonathan Conricus, described the co-ordinated mission in historical terms. "This could be a 9/11 and a Pearl Harbour rolled into one." On Sunday US president Joe Biden posted a video on X, formerly Twitter, in support of Israel. Western governments have followed suit.

Israel continues to deploy its armed forces in support of its counterattack against what it calls Hamas "terrorists", including significant artillery and air-to-ground strikes on sites in Gaza. In the Gaza strip, where hundreds of civilians have been killed, the United Nations is currently sheltering over 73,000 displaced citizens in 64 of its sponsor-ee schools. It now says it is continuing to engage with both sides to bring peace to the region.

Correction: a previous iteration of this piece incorrectly stated Leonardo was a Spanish company. It has since been amended

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Ollie Smith

Ollie Smith  is editor of Morningstar UK

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