By Elias Schisgall

It has been a tough two weeks for defense stocks.

Leading names in the sector opened sharply down on Thursday, as the prospect of a ban on stock buybacks and dividends, the memorandum of understanding between the U.S. and Iran and higher scrutiny toward European allies in NATO weighed on stock prices.

Shares in Lockheed Martin were down 5%, to $505.50 as of Thursday afternoon, while Northrop Grumman stock fell 6.2%, to $516.05. RTX was down 3.8%, at $185.29; L3Harris Technologies slid 6.7%, to $292.17; and Boeing was off 1.9%, at $221.26.

The iShares U.S. Aerospace & Defense ETF, which tracks the industry, was trading down 1.7%, at $238.57.

President Trump signed the memorandum with Iran on Wednesday, putting an end to fighting in the Middle East which pressured supplies and increased demand for military technology.

Also Thursday, Defense Secretary Pete Hegseth said the U.S. would review its military presence in Europe and threatened to cut U.S. payments to the North Atlantic Treaty Organization if members don't increase their military spending.

Republican and Democratic lawmakers have sought to avert reductions by inserting provisions in military spending legislation for 2027 that would make it harder to further reduce troops or remove stocks of U.S. weapons and munitions from Europe.

But the same legislation also included the prospect of congressional limits on the defense sector's ability to repurchase shares or pay dividends.

The Senate Armed Services Committee last week advanced a provision in this year's defense-spending bill that would halt government contracts for defense companies who engage in dividends or buybacks.

The provision, championed by Sen. Elizabeth Warren (D., Mass.), contains an exception for contractors who agree to a plan to invest in their own businesses approved by the Defense Secretary.

Cracking down on defense buybacks and dividends has also been a priority for Trump. In January, he said he would look to ban the practices, criticizing defense firms for overspending on executive compensation and returns to shareholders while underinvesting in their businesses.

Write to Elias Schisgall at elias.schisgall@wsj.com

(END) Dow Jones Newswires

June 18, 2026 15:23 ET (19:23 GMT)

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