Defense stocks surge on Middle East conflict escalation

Investing.com -- Defense contractor stocks rallied Monday, with Lockheed Martin (NYSE: LMT) rising 6.5%, L3Harris Technologies (NYSE: LHX) climbing 4%, Northrop Grumman (NYSE: NOC) gaining 5%, General Dynamics (NYSE: GD) advancing 2%, and RTX Corporation (NYSE: RTX) jumping 6.5%. AeroVironment surged 11%, while Kratos Defense & Security rose 6.7%.

The gains followed Israel and the U.S. launching a massive joint military operation against Iran on Saturday, known as "Operation Epic Fury." The attacks have already left major leaders dead, including Iranian Supreme Leader Ayatollah Ali Khamenei.

The joint military operation is expected to carry on for days.

Jefferies analysts noted the strikes reinforce the buildup of U.S. Defense Spending ($1 trillion in 2026) and key initiatives such as Golden Dome and the restocking and ramping of missiles and defensive interceptors.

William Blair analyst Louie DiPalma commented, "Geopolitical conflicts are depleting U.S. stockpiles of key missile interceptors, missiles, and drone systems."

The Department of Defense recently signed large contracts with Lockheed Martin, Raytheon, and AeroVironment to increase production of key missile systems.

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