Defense Stocks Rally After U.S.-Iran Strikes
Defense stocks rallied after U.S.-Israel strikes on Iran, boosting contractors as DoD deals and analysts raised expectations for higher defense spending.
KEY TAKEAWAYS
- Defense stocks rallied following U.S. and Israeli strikes on Iran.
- AeroVironment received a $186 million initial payment under a five-year $990 million Switchblade contract.
- Analyst Jonathan Siegmann wrote defense spending was set to surge in 2026, making higher outlays more likely.
HIGH POTENTIAL TRADES SENT DIRECTLY TO YOUR INBOX
Add your email to receive our free daily newsletter. No spam, unsubscribe anytime.
Defense stocks rallied after U.S. and Israeli strikes on Iran on Feb. 28, 2026, including Operation Epic Fury and the reported death of Ayatollah Ali Khamenei. Iranian retaliatory strikes killed three U.S. service members, lifting major contractors.
Escalation Spurs Defense Rally
The Pentagon launched Operation Epic Fury alongside Israeli strikes that reportedly killed Iranian Supreme Leader Ayatollah Ali Khamenei. Iran responded with attacks on U.S. bases in the Middle East, killing three service members. Global defense stocks rose over the past 72 hours, with BAE Systems and Lockheed Martin (LMT) among the gainers. Large-cap technology companies including Apple and Microsoft also advanced amid heightened geopolitical risk.
Contract Pipeline and Spending Outlook
Defense Secretary Pete Hegseth signaled in January 2026 that the Department of Defense (DoD) would award bigger, longer contracts for proven systems to expand the industrial base. Recent awards reflect this approach: AeroVironment received a $186 million initial payment under a five-year, $990 million Switchblade missile contract. Raytheon Technologies and Lockheed Martin have secured multiyear missile deals, strengthening their revenue visibility.
BAE Systems reported a 12% rise in operating profit for fiscal 2025 and carried an order backlog of £84 billion, positioning it to absorb production spikes. Stifel analyst Jonathan Siegmann wrote on March 2 that defense spending was set to surge in 2026 and that a protracted conflict would make higher outlays more urgent and less controversial. President Donald Trump said he expected the confrontation to last about four weeks.
