Defense stocks rise following Iran’s missile strike on Israel
Defense stocks, including Lockheed Martin (up 3.64%) and Northrop Grumman (up 2.99%), saw an increase following missile strikes by Iran on Israel in the latest escalation in the Middle East, reports a Kazinform News Agency correspondent.
As the first anniversary of the October 7 attacks approaches, the Israel-Hamas conflict has intensified. Recently, Iran launched missiles at Israel in response to the Israeli airstrike that killed Hezbollah leader Hassan Nasrallah, along with several other high-ranking officials.
Two weeks ago, a widespread pager explosion in Lebanon and Syria targeted Hezbollah leaders, believed to be orchestrated by Israel. Since then, Israel and Hezbollah have exchanged deadly airstrikes, including Lebanon's highest single-day death toll in decades. Efforts to establish a ceasefire have failed.
Against this backdrop, U.S. and European defense companies saw their stocks trading higher on Tuesday. Shares of Lockheed Martin, Northrop Grumman, Kratos Defense & Security Solutions (up 6.52%), and L3Harris Technologies (up 3.12%) were all up more than 2.5% as of the latest check.
Still, it remains to be seen if the latest increase will translate into a meaningfully different demand environment for U.S. defense firms.
In order for that to happen, “a protracted war would likely have to emerge between Iran and Israel where Iran conducted a sustained exchange of missiles and airstrikes,” writes Capital Alpha Partners’ Byron Callan, according to MarketWatch.
Still, there is a chance that an agreement could be hammered out, as has happened so often in the past with Middle East conflicts. “We’d hold that thought when thinking about what the region looks like in 2025-2028 and whether the same or higher level of defense demand is sustained,” Callan concludes.
For now, however, investors are not too optimistic about the chances of the peace process succeeding in the near term.