By Al Root

Defense stocks were mixed on Wednesday after President Donald Trump agreed to a cease-fire with Iran, with investors focusing on future spending priorities rather than what the war might mean for short-term spending decisions.

"I agree to suspend the bombing and attack of Iran for a period of two weeks," Trump wrote on Truth Social on Tuesday evening. "The reason for doing so is that we have already met and exceeded all Military objectives, and are very far along with a definitive Agreement concerning Longterm PEACE with Iran."

Lockheed Martin shares eked out a 0.2% gain and Northrop Grumman shares fell 0.5%. The S&P 500 and Dow Jones Industrial Average gained 2.5% and 2.9%, respectively.

Coming into the day, both stocks were down about 5% since the fighting began. Fighting and using missiles and munitions that need to be replaced would seem like a positive for the sector.

But the stock market is forward-looking. It doesn't care about now; it cares about what happens one year from now. Investors have long realized the impact of rising geopolitical tensions and higher defense spending. Coming into Wednesday, the iShares U.S. Aerospace & Defense ETF was up 64% over the past 12 months.

Investors have also recognized the need for more autonomous battle systems and to close the shipbuilding gap with China. Shares of drone technology company Kratos Defense & Security Solutions were up 154% over the past 12 months. Shares of shipbuilder Huntington-Ingalls Industries were up 119%.

Kratos and Huntington rose up 3.5% and 2.2%, respectively.

To be sure, investors in Lockheed and Northrop, suppliers of drones, planes, bombers, and missiles, have done fine. Those shares were up more than 40% over the past 12 months, heading into Wednesday trading.

Investors will still have to watch developments in the Middle East closely. Defense Secretary Pete Hegseth struck an optimistic tone in a Wednesday press conference, suggesting that most of the fighting was over.

"Ceasefire doesn't mean the underlying issues have been resolved," warned Capital Alpha Partners analyst Byron Callan in a Wednesday report. He still puts a 35% chance on fighting dragging into 2027.

Issues to watch include the handling of Iran's stock of enriched uranium, which Trump wants handed over.

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

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April 08, 2026 16:28 ET (20:28 GMT)

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