Also, any news that Democratic presidential Hillary Clinton is losing ground vs. potential Republican rivals should make defense stocks even more attractive, as Republicans tend to spend more on defense than Democrats.
Amid increased tensions with Iran, Saudi Arabia increased its defense budget by 17% last year, to $80.8 billion, according to the Stockholm International Peace Research Institute, CNN reported. The country likely will increase military spending by an even larger percentage this year, as it launched a war against Iranian-backed rebels in neighboring Yemen, and the pending nuclear deal between Western powers and Iran will make the Saudis more fearful of the Islamic Republic.
Indeed, according to research firm IHS, Saudi Arabia's spending on imported weapons is expected to jump 52% this year to $9.8 billion, representing one of every seven dollars spent on defense imports, 24/7 Wall Street reported.
Moreover, in April The New York Times reported that the Saudis, along with other countries in the region, were looking to purchase "thousands" of new weapons from American defense contractors, providing "a boom" for those companies.
Iran's neighbors must certainly preparing for the imminent signing of a nuclear deal between Western countries and Tehran. The deal is expected to lift most sanctions on Iran, and in the aftermath money is likely to flow into the country's economy.
Just how much, and how quickly, remains the subject of a hot debate. Critics of the deal have estimated tens of billions of dollars. For example, Michael Oren, the former Israeli ambassador to the U.S., has said Iran's "signing bonus" could be as much as $50 billion, Politico reported.Others, however, have said it will take significant time for investment in Iran to pick up.
In the past, Tehran has spent a great deal of money on backing radical rebel groups such as Hamas and Hezbollah which sought, with some success, to overthrow the established governments of the Palestinian Authority and Lebanon. The Iranians are also backing the rebels in Yemen, who have effectively taken over over that country.
So assuming that past is prologue, the Iranians will spend a great deal of newfound money on subsidizing rebels who will look to overthrow the governments of other Middle Eastern nations.