Geopolitical tensions have proven to be a defining force for financial markets in 2026, with Middle East conflict fueling persistent uncertainty and volatility across sectors.
Yet the same turbulent backdrop has created fertile ground for defense stocks, supported by mounting expectations of sharply higher military spending from Washington.
Military exchanges between Washington and Tehran have grown increasingly intense, raising fears of a broader regional conflict spreading across the Middle East.
President Trump stated that a decision on launching a “massive attack” on Iran is imminent, as the Middle East conflict spread to the Red Sea, as quoted on CNBC.
Policy support has added further fuel to the sector’s rally, with the U.S. House of Representatives advancing the fiscal 2027 National Defense Authorization Act, authorizing a record $1.15 trillion in military spending.
President Trump has also urged defense contractors to expand manufacturing capacity and increase weapons production, reinforcing the sector’s longer-term growth outlook.
Several major defense companies delivered robust second-quarter 2026 earnings results, giving investors additional confidence in the sector’s near-term trajectory.
Lockheed Martin (LMT) reported second-quarter 2026 adjusted earnings of $7.94 per share, beating the Zacks Consensus Estimate of $7.22 by 10%, with net sales reaching $20.06 billion.
LMT’s total backlog stood at $230.42 billion as of June 28, 2026, compared with $193.62 billion at the end of 2025, reflecting strong demand across all four business segments.
The Missiles and Fire Control segment was the largest contributor to the backlog at $87.88 billion, followed by Aeronautics at $54.36 billion, Rotary and Mission Systems at $48.45 billion, and Space at $39.72 billion.
LMT carries a Momentum Score of A and gained approximately 10.54% on July 23 after releasing its earnings results before market open that morning.
RTX Corporation (RTX) posted second-quarter 2026 adjusted earnings per share of $1.89, beating the Zacks Consensus Estimate of $1.66 by 13.9%, while revenues rose 14.5% year over year to $24.71 billion.
RTX’s backlog climbed 22% to $289 billion, with the company securing $43 billion in new awards during the quarter, including nearly $20 billion at Raytheon alone.
The total backlog comprised $170 billion of commercial orders and $119 billion of defense orders, providing strong visibility into future production requirements across both segments.
RTX carries a Zacks Rank of 2 (Buy) and gained approximately 7.3% on July 23 following the release of its earnings before market open.
Northrop Grumman (NOC) reported second-quarter 2026 adjusted earnings of $7.68 per share, beating the Zacks Consensus Estimate of $6.84 by 12.3%, though the bottom line declined 5.8% from the year-ago quarter.
NOC’s total sales of $10.88 billion beat the Zacks Consensus Estimate of $10.80 billion by 0.7%, improving 5.1% from $10.35 billion reported in the same quarter last year.
Total operating income during the quarter was $1.10 billion, reflecting a significant decrease from $1.43 billion in the prior-year quarter, despite the top-line beat.
NOC carries a Momentum Score of A and has gained approximately 10% since reporting second-quarter 2026 earnings on July 21 before market open.
For investors seeking broad exposure to the defense sector’s momentum, ETFs including iShares U.S. Aerospace and Defense ETF (ITA), Invesco Aerospace and Defense ETF (PPA), SPDR S&P Aerospace and Defense ETF (XAR), Global X Defense Tech ETF (SHLD), First Trust Indxx Aerospace and Defense ETF (MISL), and U.S. Global Technology and Aerospace and Defense ETF (WAR) offer compelling options.
