MW Trump's budget seeks historic increase to defense spending. The industry could use a boost, these ETFs show.

By Robert Schroeder

Congress will debate the $1.5 trillion request amid the war with Iran

President Donald Trump's defense-budget proposal arrives as the industry's stocks are falling amid the war against Iran.

President Donald Trump is seeking a historic increase in defense spending, in what may turn out to be a relief for the industry amid the conflict in Iran.

More than a month into the U.S.-Israeli war against Iran, defense stocks have actually been falling, not rising. The iShares U.S. Aerospace & Defense ETF ITA - which includes Lockheed Martin LMT and RTX $(RTX)$ - was down nearly 9% since the start of the war through Thursday. And the Invesco Aerospace & Defense ETF - whose components include Boeing $(BA)$ and Honeywell International $(HON)$ - reached a record on March 2 but has dropped 6.3% since the the start of the war.

Trump's fiscal 2027 budget proposal, released Friday, includes $1.5 trillion in defense spending, while at the same time reducing nondefense spending by 10%. The military-spending proposal includes $1.1 trillion for the Defense Department for the next fiscal year and an extra $350 billion for munitions.

"President Trump is committed to rebuilding our military to secure peace through strength," the White House budget proposal said.

Trump's budget, like those of all presidents, doesn't carry the force of law and is a statement of an administration's wishes and values. It's up to the Republican-controlled Congress to determine which parts to pass into law. The next fiscal year begins Oct. 1.

Why hasn't the defense sector fared better amid the intense military conflict? In some cases, as the Wall Street Journal recently pointed out, stocks were already pricing in a lot of growth. And in the case of Honeywell, as MarketWatch has reported, demand has been boosted but shipping disruptions have delayed revenue.

Read: Why Honeywell's stock has dropped even as the Iran conflict has boosted munitions demand

Congress returns from a break the week of April 13 and will begin debating the budget even as lawmakers are fighting over the current year's Department of Homeland Security funds.

-Robert Schroeder

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April 03, 2026 12:29 ET (16:29 GMT)

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