Defense stocks tear higher following Iran's missile strikes on 2 US military bases

AP Photo/Andreea Alexandru

A US serviceman walks by a Air Force F-22 Raptor, flown Monday, April 25, 2016.

• Defense stocks including Northrop Grumman, Lockheed Martin, and Raytheon jumped in early Tuesday trading after Iran launched more than a dozen missiles at Iraqi bases housing US service members.
• Northrop Grumman and Lockheed Martin both traded as much as 1.2% higher. L3Harris Technologies jumped as much as 1.4%, and Raytheon rose about 0.9%.
• The missile strikes were "proportionate measures in self-defense" and made in response to the US's assassination of top Iranian general Qassem Soleimani, Iran Foreign Minister Javad Zarif said.
• Military firms typically surge following conflict escalations, as war fuels increased orders for their products.
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Defense stocks including Northrop Grumman, Lockheed Martin, and Raytheon leaped in early Tuesday trading after Iran launched missile strikes on two military bases housing US troops.

Northrop Grumman and Lockheed Martin, both major players in the aerospace sector, traded as much as 1.2% higher Tuesday morning. L3Harris Technologies surged as much as 1.4%, and Raytheon jumped about 0.9%.

Iran targeted two Iraqi bases Tuesday night with more than a dozen ballistic missiles in "proportionate measures in self-defense," according to Iranian Foreign Minister Javad Zarif. Neither Iraqi nor coalition forces "recorded any losses," The New York Times reported, citing the Joint Command in Baghdad.

Aerospace and defense companies typically surge higher in the wake of heightened geopolitical tensions or new threats of war. The firms supply key parts, vehicles, and weapons to the US military, and wartime often drives increased orders for their products.

The missile attacks were made in response to the US's assassination of top Iranian general Qassem Soleimani on Friday. The attack came "at the direction of" President Trump and was meant to deter "future Iranian attack plans," according to the Defense Department. Several Democrats have since called on the president to reveal intelligence justifying the airstrike.

Iranian officials hinted at the Tuesday airstrikes soon after, with the nation's supreme leader, Ayatollah Ali Khamenei, warning "harsh retaliation is waiting" for the US.

The US drone strike led global stocks to tank and pushed gold and oil prices higher. Some analysts deemed the event a good opportunity to pile into safe-haven assets, while others advised clients to stay in stocks and potentially buy more while prices are lower.

"Iran does usually retaliate so the current situation brings rising uncertainty. But our view about this being a bull market has not changed," David Donabedian, CIBC Private Wealth Management's chief investment officer, wrote Friday. "Iran is something that must be watched, but investors should not overreact."

The S&P 500 Aerospace & Defense Industry Index closed at 17,529.38 on Tuesday, up roughly 2.4% from Thursday's close and before reports of Soleimani's assassination.

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