Defense Stocks Surge Amid Iran Strikes

If there’s one sector that consistently benefits from geopolitical conflict, it’s defense. And right now, with US and Israeli forces conducting major strikes on Iran, defense stocks are positioned for a significant surge when markets open Monday. I’ve been tracking this sector for years, and the current setup looks like one of the strongest catalysts we’ve seen.

Global defense spending already hit $2.63 trillion in 2025. The US military budget alone stands at $924.7 billion. Now add a major military operation against Iran—Operation Epic Fury—and you’re looking at defense stocks Iran investors have been watching for exactly this kind of catalyst.

Which Defense Stocks Stand to Gain Most

Lockheed Martin is the obvious frontrunner. As the world’s largest defense contractor, they manufacture the F-35 fighter jets, missile defense systems, and precision munitions that are central to operations like the Iran strikes. Any extended military campaign means accelerated orders and higher revenue projections.

Boeing’s defense division is another major beneficiary. While their commercial aviation side may take a hit from 19,000+ flight delays and Middle East airspace closures, their defense contracts for fighter jets, satellites, and weapons systems could more than offset that. L3Harris Technologies, which specializes in communication systems and electronic warfare, is also well-positioned.

Defense ETFs for Broader Exposure

If picking individual defense stocks Iran-related feels too risky, consider defense ETFs. The iShares U.S. Aerospace & Defense ETF (ITA) gives you diversified exposure across the sector. The SPDR S&P Aerospace & Defense ETF (XAR) is another solid option with equal-weighted holdings that reduce concentration risk.

What I like about ETFs here is that you capture the sector-wide momentum without betting on a single company’s execution. Even smaller defense contractors tend to rally during conflict periods as the entire sector benefits from increased government spending expectations.

How Long Could the Defense Rally Last

Here’s where it gets interesting. If the Iran operation is a quick, contained strike—similar to past limited engagements—defense stocks might see a 5-10% pop followed by a gradual retreat. But if this evolves into a prolonged campaign, as Trump’s calls for regime change suggest, the defense sector could see sustained multi-month gains.

Congress is already debating war powers resolutions, and regardless of outcome, the political reality is that defense budgets are going up. Even lawmakers who oppose the strikes will support funding for troops already deployed. That’s how defense spending works—it ratchets up during conflict and rarely comes back down quickly.

Risks to Consider With Defense Stocks

Defense stocks aren’t without risk. A sudden diplomatic resolution could erase gains quickly. Supply chain disruptions from the broader conflict could slow production. And there’s always the risk that Congress imposes spending constraints, though that’s historically unlikely during active operations.

My approach: allocate 3-5% of your portfolio to defense sector exposure if you don’t have it already. Use ETFs for diversification. And be prepared to take profits if a ceasefire or diplomatic breakthrough is announced—these stocks tend to give back gains as quickly as they accumulate them when peace prospects emerge.