Al Root

Defense stocks fell again Tuesday, failing to get a boost from ongoing fighting in the Middle East, which may or may not be abating soon.

Shares of Lockheed Martin and Northrop Grumman were both down more than 1% in early trading on Tuesday, while the S&P 500 and Dow Jones Industrial Average were both off about 0.4%. Shares of drone makers AeroVironment and Kratos Defense & Security Solutions slid about 2% and 4%, respectively. The iShares Aerospace & Defense exchange-traded fund was 0.4% lower.

Tuesday's declines left Lockheed and AeroVironment shares down 0.4% and 11.6% since the fighting in Iran began. The iShares ETF was off 1.2% over that span.

Active fighting seems to be a key ingredient in higher defense stock prices. The stock market, however, is forward-looking; buy the rumor and sell the news, as the saying goes. With the conflict now under way, investors' minds have likely shifted to what happens next. So, paradoxically, war can leave investors uneasy about shares of defense contractors.

Investors also hate uncertainty, which tends to be a feature of war. So far this week, President Donald Trump has said fighting in Iran was close to complete, followed by warnings that the pace of attacks would increase if Iran continued its resistance.

Iran "will be hit TWENTY TIMES HARDER," Trump posted on Truth Social on Monday evening. "Death, Fire, and Fury will reign upon them."

Iran, for its part, has said it would keep fighting even as its drone launches are down 83%, according to Defense Secretary Pete Hegseth.

Still, defense stocks have been big winners lately. The iShare ETF has spiked more than 60% over the past year, through early Tuesday trading. Higher military spending and rising geopolitical tensions have boosted investor sentiment.

After the Iran conflict ends, those two trends will likely remain in place.

As for the stocks, L3Harris Technologies remains a Wall Street favorite among large contractors, with 71% of analysts covering the company rating shares Buy.

L3Harris stock was down about 0.7% since the start of fighting, through early trading Tuesday.

AeroVironment and Kratos also remain popular, with Buy-rating ratios of 85% and 79%, respectively. The average Buy-rating ratio for stocks in the S&P 500 is currently about 59%.

Write to Al Root at allen.root@dowjones.com

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March 10, 2026 11:46 ET (15:46 GMT)

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