The fragile hope for a long-term peace in the Middle East is rapidly thinning. Despite a recently mediated two-week ceasefire between the United States and Iran, hostilities have refused to quieten.
Reports of "Operation Eternal Darkness" in Lebanon and ongoing strikes on critical energy infrastructure, such as the Lavan Oil Refinery, have left the fate of a permanent truce hanging in the balance.
For investors willing to take this as an opportune time to revalue their portfolio, defense firms and the Exchange-Traded Funds (ETFs) that hold them demand a crucial spotlight, as these regional tensions refuse to de-escalate.
While the financial spotlight remains firmly on defense ETFs, a deeper analysis of the individual companies benefiting from the conflict, along with an assessment of their long-term viability, is essential for gaining a more complete picture of the investment landscape.
Prime Defense Contractors Gaining From Iran War
Major defense contractors are direct beneficiaries of the prolonged turmoil in the Middle East that has entered its fifth week now, testing global munitions inventories.
The Pentagon ordered quadrupling production of key components for the THAAD Anti-Missile System in March 2026, which should benefit its prime contractors — Lockheed Martin LMT and BAE Systems (as per a Vanguard report).
Lockheed has signed a deal with the Pentagon to accelerate production of Precision Strike Missiles — tactical ballistic missiles used for the first time against Iran.
On the other hand, Honeywell Aerospace received an order from the Pentagon to boost the production of “critical components for America’s munitions stockpile,” including navigation systems.
RTX Corp. RTX, which produces the Patriot missile systems and Tomahawk missiles, is also seeing surging demand for its air defense technologies. Northrop Grumman NOC, whose B-2 stealth bombers have been used for precision strikes in Iran, has also been benefiting from the conflict.
In a nutshell, these defense firms are not merely reacting to active combat but are entering a sustained growth cycle over the coming decades, as ongoing tensions in the Middle East set the stage for steady earnings expansion.
Long-Term Viability of Defense
The outlook for defense firms looks promising regardless of how the war in the Middle East unfolds. If the conflict drags on — with oil prices near $150 a barrel and the Strait of Hormuz disrupted — we may expect continued orders for missiles, jets and surveillance systems.
Even if peace emerges, broader market factors like rising geopolitical uncertainty across different parts of the globe ensure steady growth for the industry. NATO allies have pledged to raise defense spending to 5% of GDP (from the previous 2% target) by 2035, while the U.S. defense budget is also on track to cross the $1 trillion threshold. These tailwinds suggest solid growth expectations for prominent defense ETFs.
Defense ETFs in Spotlight
For investors looking to capture this industry-wide momentum, the following ETFs offer diversified exposure to the prime defense contractors:
iShares U.S. Aerospace & Defense ETF ITA
This fund, with net assets worth $14.17 billion, offers exposure to 44 U.S. companies that manufacture commercial and military aircraft and other defense equipment. RTX holds the second position in this fund, with 16.43% weightage, LMT holds the seventh with 4.48% weightage, and NOC holds the ninth with 4.34% weightage.
ITA has gained 8% year to date. The fund charges 38 basis points (bps) as fees. It traded at a volume of 0.65 million shares in the last trading session.
Invesco Aerospace & Defense ETF PPA
This fund, with a market value of $8.36 billion, offers exposure to 61 companies involved in the development, manufacturing, operations, and support of U.S. defense, homeland security and aerospace operations. RTX holds the third position in this fund, with 7.84% weightage, LMT holds the fourth with 7.37% weightage, and NOC holds the fifth with 5.03% weightage.
PPA has rallied 12.2% year to date. The fund charges 58 bps as fees. It traded at a volume of 0.19 million shares in the last trading session.
Global X Defense Tech UCITS ETF SHLD
This fund, with net assets worth $8.65 billion, offers exposure to 49 companies that build and manage cybersecurity systems, utilize artificial intelligence and big data, and build advanced military systems and hardware such as robotics, fuel systems and aircraft for defense applications. LMT holds the first position in this fund, with 9.05% weightage, RTX holds the second with 8.02% weightage, and NOC holds the ninth with 4.74% weightage.
SHLD has risen 14.6% year to date. The fund charges 50 bps as fees. It traded at a volume of 1.20 million shares in the last trading session.
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Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
Global X Defense Tech ETF (SHLD): ETF Research Reports
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
RTX Corporation (RTX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).