The Financial Times reports:

Since the Oct. 7, 2023 attacks on Israel, the best-performing major stock market in the world is … Israel. After taking an initial hit, the market recovered fully in four weeks, and since then is up around 80 per cent in dollar terms.

This ascent continued through the recent 12-day war with Iran, when most geopolitical experts thought their worst fears of a wider conflict were coming to pass. The stock market, in contrast, kept signalling that the conflict would end soon, with Israel prevailing both militarily and economically.

That message came through loud and clear in forward-looking price-to-earnings ratios, which have risen over the past 21 months by 40 per cent, compared with 20 per cent in the rest of the world and a slight decline in neighbouring Gulf markets, led by Saudi Arabia and the United Arab Emirates. Despite all the international criticism of Israel for its multiple military offensives, from Gaza to Iran, a surge in foreign buying has fuelled the rally in its stock market.

Perhaps the most telling sign of its dynamism is that Israel now spends more than 6 per cent of GDP on research and development — more than any other nation and over double the global average. An unusually high share — about half — of that R&D funding comes from foreign multinationals, many involved in defence-related industries. Their work created the Iron Dome and the web of interceptor rockets that have reportedly destroyed more than 85 per cent of missiles and an even larger share of the drones launched at Israel in recent conflicts. [Continue reading…]