Shifting U.S. Public Opinion and Its Impact on Israel-Related Assets: Navigating Political and Financial Risks in a Fractured Landscape

The U.S.-Israel defense relationship has long been a cornerstone of American foreign policy, but 2025 has brought seismic shifts in public sentiment that are reshaping the financial and political landscape for investments tied to this alliance. From bipartisan legislation to defense contracts, the interplay between public opinion, congressional action, and market dynamics is creating a volatile environment for stakeholders. This article dissects the risks and opportunities for investors navigating this complex terrain.

The Cracks in Consensus: Public Opinion and Partisan Divides

Recent polling reveals a dramatic erosion of U.S. public support for Israel's military actions, particularly in Gaza. According to Gallup, approval of Israel's operations in Gaza has plummeted to 32% in July 2025—the lowest since the conflict began in October 2023. Democrats and independents have driven this decline, with approval rates dropping 16 points each since last year. Meanwhile, Republican support remains robust at 71%, underscoring a growing partisan chasm.

This polarization extends to perceptions of Israeli Prime Minister Benjamin Netanyahu, whose unfavorable rating now stands at 52%—a stark reversal from 2019, when 40% of Americans viewed him favorably. The Chicago Council on Global Affairs-Ipsos survey further highlights the shift: 61% of Americans now believe Israel plays a negative role in resolving Middle East conflicts, with Democrats (81%) and independents (65%) leading the criticism.

Legislative Uncertainty: The United States-Israel Defense Partnership Act of 2025

Bipartisan lawmakers have sought to reinforce the U.S.-Israel defense relationship through the United States-Israel Defense Partnership Act of 2025, which authorizes $150 million annually for counter-drone programs, $75 million for emerging defense tech, and $80 million for anti-tunneling initiatives. While the bill enjoys cross-party support, its fate hinges on public sentiment and congressional appropriations.

The legislation's success faces headwinds from the Democratic base, where opposition to Israel's military actions has intensified. Progressive Democrats, including Rep. Summer Lee, have already pushed to strip funding for Israel's missile defense systems from defense bills. Such efforts could delay or dilute the Act's provisions, creating uncertainty for defense contractors and investors.

Market Impacts: Defense Contractors and Trade Tensions

Despite the political turbulence, U.S. defense contractors like Lockheed Martin (LMT) and Northrop Grumman (NOC) have maintained 2025 financial forecasts, buoyed by strong demand for missile systems and fighter jets. However, Raytheon (RTX) has warned of a potential $850 million profit hit from Trump's tariffs on metals and China, exposing the sector's vulnerability to trade policies.

The broader defense industry is also contending with shifting global alliances. The European Union's push to bolster its own defense capabilities by 2030 could reduce reliance on U.S. firms, while Canadian and Gulf allies reassess their partnerships amid trade tensions. These dynamics threaten to erode long-term revenue streams for companies like Boeing and Raytheon.

Investment Advice: Balancing Risk and Resilience

For investors, the key lies in hedging against geopolitical volatility while capitalizing on the resilience of the defense sector. Here's a strategic approach:

1. Diversify Exposure: While defense contractors remain critical, consider balancing portfolios with companies involved in cybersecurity, AI, and non-lethal tech—sectors less entangled in the Israel-Palestine conflict.
2. Monitor ESG Trends: Growing public scrutiny of military aid to Israel may amplify ESG-related risks. Prioritize firms with transparent supply chains and ethical oversight.
3. Track Legislative Shifts: Closely follow debates over the Defense Partnership Act and potential amendments. A weakened version of the bill could signal reduced funding for joint programs.
4. Assess Trade Impacts: Evaluate how tariffs and supply chain disruptions affect margins. Firms with diversified manufacturing bases (e.g., Northrop Grumman) may outperform those reliant on single markets.

Conclusion: A Tenuous Path Forward

The U.S.-Israel defense relationship is at a crossroads. While bipartisan lawmakers and institutions like AIPAC advocate for deepening ties, public opinion and political polarization pose existential risks. For investors, the challenge is to navigate this uncertainty by staying agile, informed, and diversified. As the geopolitical landscape evolves, so too must the strategies of those seeking to profit—or mitigate losses—in this high-stakes arena.