Defense-sector equities moved sharply higher on Monday as escalating conflict in the Middle East boosted expectations for increased military spending and replenishment of weapons inventories.
Lockheed Martin (NYSE:LMT) climbed 6.5%, while L3Harris Technologies (NYSE:LHX) gained 4%. Northrop Grumman (NYSE:NOC) advanced 5% and General Dynamics (NYSE:GD) rose 2%. RTX Corporation (NYSE:RTX) also posted strong gains, jumping 6.5%. Among smaller defense names, AeroVironment (NASDAQ:AVAV) surged 11% and Kratos Defense & Security (NASDAQ:KTOS) added 6.7%.
The rally followed a large-scale joint military operation launched Saturday by Israel and the United States against Iran, dubbed “Operation Epic Fury.” The strikes reportedly resulted in the deaths of several senior Iranian figures, including Supreme Leader Ayatollah Ali Khamenei, and military activity is expected to continue in the coming days.
Jefferies analysts said the escalation reinforces expectations for expanding U.S. defense budgets — projected to reach roughly $1 trillion in 2026 — alongside major initiatives such as Golden Dome and accelerated efforts to replenish missile and interceptor inventories.
William Blair analyst Louie DiPalma noted, “Geopolitical conflicts are depleting U.S. stockpiles of key missile interceptors, missiles, and drone systems.”
Recent procurement activity reflects that trend, with the U.S. Department of Defense awarding sizable contracts to Lockheed Martin, Raytheon, and AeroVironment aimed at boosting production capacity for critical missile systems and related defense technologies.