Piousbox

Update (Monday): 

Defense stocks in Asia and Europe are extending their rally after the U.S.-Israeli strike on Iran, dubbed Operation Epic Fury, added fresh momentum to the global defense trade. The move is spilling over into U.S. premarket trading, where big defense firms such as Lockheed Martin, Northrop Grumman, and RTX jumped as investors panic-buy war stocks.

In European trading, BAE shares rose as much as 8.3%, while Rheinmetall AG gained 6%. Japan's Hosoya Pyro-Engineering Co. surged nearly 10%. Meanwhile, China's J-35 stealth fighter maker, AVIC Shenyang Aircraft Company, and drone-maker AVIC Chengdu UAS increased by 5% and 20%, respectively.

Goldman analyst Jeremy Elster said, "Strategically, BAE is most exposed to the Middle East (~15% of sales) and to U.S. DoD-led spending (~42% of sales)."

We pointed out on Sunday evening that defense stocks were set to soar on Monday, as investors recognized the race among the U.S. and allies to tap defense firms to replenish the hundreds, if not thousands, of air-delivered munitions U.S. and Israeli forces used to neutralize high-value IRGC targets, along with the countermeasure systems needed to defend against IRGC missile and drone threats.

Elster continued:

In terms of capabilities, there is demand being placed on U.S. stockpiles of interceptors such as the SM-3 and Patriot systems (*U.S. Races to Accomplish Iran Mission Before Munitions Run Out - WSJ, *Five Countries Have Shot Down About 1,400 Iranian Missiles and Drones - WSJ). Though the extent of support or involvement from Europe remains limited, should the U.S. call on Europe interceptor stockpiles, the equivalent system is the SAMP/T interceptor, manufactured in a JV between Thales and MBDA (a munitions JV owned by Airbus (37.5%), BAE (37.5%) and Leonardo (25%)). Positioning in defence is relatively light (HFs have generally been rotating back into civil of late), with concerns on near-term earnings and execution weighing.

Elster pointed out, "From here, Eu defence has been making lower highs vs SXNP on pro-cyclical rotation and the drag from entering the "execution" phase of the Eu production ramp. Without an extended conflict and/or Eu involvement, this trend remains in place."

Stateside, U.S. defense stocks Lockheed Martin and Northrop Grumman rose 7.9% and 5.8% in premarket trading.

"The market will take this as broadly positive for European defense stocks," MWB Research analyst Jens-Peter Rieck wrote in a note, though "any move is likely to be driven more by sentiment than by changes to earnings estimates."

GS US Defense Index (Goldman Sachs thematic basket tied to U.S. defense stocks) is primed for another breakout.

Related:

• Rise Of "War Unicorns" As Big Defense Primes Face An "Adapt Or Die" Moment

Jefferies analyst Sheila Kahyaoglu told clients that the desire for military spending will spread across the Middle East. She said major U.S. defense companies would capture much of this new business.

*   *   * 

The scale of the U.S.-Israeli strike on Iran this weekend was massive, involving hundreds of fighter jets, bombers, and air-delivered munitions across more than 100 Islamic Revolutionary Guard Corps-linked targets. Our focus has shifted to U.S. munitions stockpiles, which were already dwindling after four years of the Russia-Ukraine war. The conflict so far will intensify Wall Street's focus on U.S. defense firms come Monday morning and potentially lead investors to view the need for defense firms to accelerate weapons production, setting up another bullish scenario for these war stocks.

For the first time, Israel and the U.S. have struck targets deep in "the heart of Tehran," Israel Defense Forces officials stated on Sunday.  

"The Air Force, guided by Military Intelligence, has now launched a broad wave of strikes toward targets of the Iranian terror regime in the heart of Tehran," the IDF said.

Media outlet Clash Report stated on X, "Over 100 targets hit by 200 Israeli jets, including nuclear sites and top IRGC officials."

The massive strike has brought into focus how a multi-war front for the West, whether that's Ukraine or now Iran, is rapidly draining America's munitions stockpile, especially air-defense interceptors needed to stop Iranian missile and kamikaze drone retaliation. 

The Wall Street Journal noted that U.S. and allied forces are burning through THAAD, Patriot, and SM-3 missile systems faster than they can be replaced, while also using vast amounts of Tomahawk cruise missiles and other precision weapons that would be critical if another conflict emerged somewhere else in the world. 

Dozens of US Tomahawk missiles flying over Qader Karam of the Kurdistan region in Iraq towards Iran. pic.twitter.com/V70zg5b3Hd

— Visegrád 24 (@visegrad24) February 28, 2026

WSJ explained more:

The precise size of the U.S. stock of air-defense interceptors -- what the Pentagon calls magazine depth -- is classified. But repeated conflicts with Iran and its proxies in the Middle East have been eating into the supply of air defenses in the region.

Kelly Grieco, a senior fellow at the Stimson Center think tank, told the outlet, "One of the challenges is you can deplete these really quickly," adding, "We're using them faster than we can replace them." 

"The Trump administration has fired TLAMS at an extraordinary rate in operations around the globe, in the Middle East against Iran and the Houthis as well as in Nigeria on Christmas Day," Becca Wasser, a senior fellow at the Center for a New American Security, noted. 

If the Iranian conflict broadened or was prolonged, the Department of War may have to source additional air-delivered munitions supplies from other regions, potentially affecting deterrence  cabilities other foreign adversaries, such as China and North Korea.

The theme emerging here is that U.S. defense-related stocks could be primed for another breakout after trading sideways since mid-January. Certainly, the Caribbean gunboat diplomacy and the Maduro raid in early January lifted these war stocks, and they will likely see another push higher come Monday.

GS US Defense (Goldman Sachs thematic basket tied to U.S. defense stocks):

Jonathan Conricus, a former IDF spokesman, told the outlet that he was "underwhelmed so far by the amount of missiles that the Iranians have been able to fire." 

"Eventually it boils down to numbers," Conricus added. "How many interceptors will we have versus how much launchers will they be able to field and fire."

Ultimately, war comes down to numbers, and the question is which side burns through its missiles and bombs first.