When geopolitical tensions flare up, defense stocks tend to get a boost. And right now, they're getting quite the boost. Kratos Defense and Security Solutions (KTOS) jumped 10.10% in pre-market trading Monday, while defense giants Lockheed Martin (LMT) and RTX Corp (RTX) climbed 6.67% and 6.58%, respectively.
They weren't alone. L3Harris Technologies (LHX) and Northrop Grumman Corp (NOC) also moved higher, gaining 5.61% and 5.20% in the early session. The simple story here is that investors are betting on more business for these companies. U.S. and Israeli strikes on Iran, followed by Tehran's retaliation, have created a situation where everyone expects defense spending to increase. When there's prolonged regional instability, governments tend to open their checkbooks for military hardware.
The conflict, which has now entered its third day, includes a significant event: the death of Iran's Supreme Leader, Ayatollah Ali Khamenei. On Sunday, President Donald Trump indicated that the current U.S. military strikes could continue for "four to five weeks" if necessary and warned there could be more casualties in the coming days. Meanwhile, Iran's security chief, Ali Larijani, rejected talks with Washington, accusing Trump of driving the region into chaos.
It's not just defense stocks feeling the heat. The global energy markets turned highly volatile on Monday. Crude oil prices jumped to their highest levels since early 2025 as the military conflict escalated. The fear is real enough that Goldman Sachs (GS) estimates an $18-per-barrel risk premium baked into prices—that's about 25% of current prices. The big worry fueling that premium? The growing possibility of a prolonged blockade of the Strait of Hormuz, a critical chokepoint for global oil shipments.
So, you've got a classic market reaction to geopolitical risk. Defense companies rally on expectations of more spending. Oil prices spike on fears of supply disruption. And everyone watches to see how long this latest chapter of instability will last and what it will mean for portfolios beyond just a single day's trading.
