Defense Stocks Stay in Demand As Geopolitical Tensions Escalate

On April 13, Iran carried out a retaliatory strike against Israel, raising the risk of a wider conflict involving U.S. forces. Israeli sources report over 300 missiles and drones deployed in the attack, marking Iran's first direct military assault on Israel. 

Iran launched the attack in response to a suspected Israeli strike on the Iranian consulate in Damascus, Syria, earlier this month. This event represents a significant escalation in the longstanding tension between the two countries, which has intensified since Israel declared war on Hamas last October. Following this, Israel started a military operation in the Gaza Strip which has resulted in over 33,000 fatalities. Additionally, Israel has implemented a severe blockade on the region which only lightened recently when U.S. President Biden demanded that the country let aid pass. 

Market Response 

Despite its substantial scale, the Iranian attack resulted in minimal physical damage within Israel. However, the oil and energy markets have been bracing themselves for Israel's response to the missiles. 

Since Oct 7, the demand for defense stocks has escalated. Lockheed Martin (LMT:US) has risen above 4% in the past month. Rtx Corp (RTX:US) is up by more than 17% year-to-date.

Most recently, Lockheed Martin secured a $17 billion contract from the U.S. Missile Defense Agency to develop the Next Generation Interceptor (NGI), aimed at countering ICBM threats from countries like North Korea and Iran. 

Speaking of a well-timed investment stroke, Rep. Kevin Hern bought up to $15,000 worth of both LMT and RTX shares on March 29 and March 21 respectively. Additionally, he also stocked up on several energy issuers like Devon Energy Corp (DVN:US), Exxon Mobil Corp (XOM:US) and NextEra Energy Inc (NEE:US). 

American Reaction

One of Israel’s closest and most formidable allies, the U.S. President Joe Biden, called Iran’s attacks ‘unprecedented’. He stated that he had a conversation with Israeli Prime Minister Benjamin Netanyahu during the night and reiterated the United States' dedication to Israel's security.

Israel has also been the recipient of the highest amount of U.S. military assistance, as well as overall aid from the United States compared to any other nation. Post-October 2023, the U.S. Senate approved a bill allocating $14.1 billion for supplementary spending related to Israel. Most recently, the call for further aid heightened post Iran’s strike. 

Rep. Lois Frankel tweeted:

https://twitter.com/RepLoisFrankel/status/1779895503561326973 

The proposal was signed by Rep. Josh Gottheimer, Former Speaker Nancy Pelosi, Rep. Jared Moskowitz, and Rep. Kathy Manning, among others. Among these, Rep. Manning’s spouse also purchased shares of LMT on Jan 23. 

In a last update, both the U.S. and Iran appeared committed to avoiding further escalation. Biden assured Prime Minister Benjamin Netanyahu of unwavering support for Israel's security but clarified that the U.S. will not engage in offensive actions against Iran.