By Al Root

Defense stocks fell early Monday after President Donald Trump announced a memorandum of understanding to effectively end the war with Iran that started at the end of February.

The sector can't seem to catch a break lately, battered by a war that is using up U.S. missile supplies. Maybe the peace can be a catalyst for higher prices.

That isn't the case yet. Shares of RTX, Northrop Grumman, Lockheed Martin, L3Harris Technologies, and Huntington-Ingalls Industries were down between 0.3% and 1.1% in premarket trading, while S&P 500 and Dow Jones Industrial Average futures were up 1.3% and 1.1%, respectively.

International benchmark crude oil prices were down 5% to about $83 a barrel. They were about $70 a barrel in February, before fighting began, and topped out above $115 a barrel in April.

Terms of the deal include a cease-fire, easing of foreign sanctions on Iran, ending the U.S. naval blockade, and opening the Strait of Hormuz. Iran's nuclear program will be the subject of a 60-day negotiating window.

Coming into Monday's trading, those five defense stocks were down an average of 20% since the fighting began. That's bear market territory. (A bear market is typically defined as a 20% decline from recent highs.)

Investors might assume that war is good for the sector, with the U.S. military needing to replenish weapons stocks and repair equipment. Indeed, the Iran war was a catalyst for the U.S. government to boost missile orders and incentivize higher production. Shares, however, were performing well coming into the conflict. At the end of February, the five stocks were up an average of 77% over the past 12 months. Higher defense spending in the U.S. and Europe had boosted investor sentiment.

Now, investors fear the war could mean peak spending. What's more, the war has proved unpopular, creating the risk that a Democratic-controlled Congress could push back on spending growth.

"The most positive outcome for defense demand would be that, in July or August, maritime traffic in the Gulf returns to normal levels, and that Iran again has access to oil export revenue and the IRGC is receiving cash," wrote Capital Alpha Partners analyst Byron Callan over the weekend.

That would mean more cash for Iran to rearm, which would require more spending by Israeli, gulf states, and the U.S. to counter any future threats. "We don't know how long it takes Iran to build ballistic and cruise missiles, but we assume it's far shorter than the time it takes the U.S. and Israel to build ballistic missile interceptors," added Callan.

Counterintuitively, it's the peace that could give the sector a boost.

Shares of Boeing and GE Aerospace were up about 2% in premarket trading. Both stocks have defense franchises, but both are tied more to commercial aerospace. Understanding recent stocks moves for those two are easier. Higher oil prices threaten commercial aerospace demand. Lower oil prices help.

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

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June 15, 2026 09:09 ET (13:09 GMT)

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