US defence stocks were in demand on Monday as Wall Street reacted to the US and Israel's war on Iran and the retaliatory strikes on regional allies including Saudi Arabia, Qatar and UAE.
Shares in Northrop Grumman Corp (NYSE:NOC, XETRA:NTH) rose 4.9%, with Axon Enterprise Inc (NASDAQ:AXON) and RTX Corp (NYSE:RTX, XETRA:5UR) also both climbing over 4%.
L3Harris Technologies Inc (NYSE:LHX, XETRA:HRS) and Lockheed Martin Corp (NYSE:LMT) both rose over 3%, while Huntington Ingalls Industries Inc (NYSE:HII), Textron Inc (NYSE:TXT) and General Dynamics Corp (NYSE:GD, XETRA:GDX) all rose over 2%.
The US and Israel launched 'Operation Epic Fury' early on Saturday, just days after nuclear talks between the US and Iran ended with no compromise reached.
Air strikes focused on nuclear and military sites around Iran, with the assassination of Iran’s supreme leader Ayatollah Khamenei and other senior officials reported.
Iran's retaliation left four US service people dead, while three US F-15E Strike Eagles fighter jets were downed over Kuwait, US Central Command confirmed, attributing the latter to "an apparent friendly fire incident".
In his first press briefing following the attacks, Defense Secretary Pete Hegseth said that the war in Iran will not be "endless," and that the administration's goal was not regime change.
He said the reason for the strikes was that "Iran was building powerful missiles and drones to create a conventional shield for their nuclear blackmail ambitions."
Morgan Stanley strategists said: "This weekend’s escalation in the Middle East raises global geopolitical risk, a key driver of defence spending, highlighting in particular the need for air and missile defence capabilities."