Renewed military conflict between the United States and Iran is sending shockwaves through financial markets, with defense stocks and ETFs emerging as standout beneficiaries.
U.S. strikes on Iranian rocket launchers in the Strait of Hormuz, followed by retaliatory attacks on U.S. bases in Jordan, have dramatically escalated tensions in the Middle East.
Analysts at Zacks Equity Research are pointing investors toward defense-focused ETFs as a strategic way to capture upside from the prolonged standoff.
The Strait of Hormuz, through which approximately 20% of the world’s oil once passed, remains a central flashpoint driving the current conflict and its economic consequences.
Iran’s reported deployment of sea mines and demands for checks on tanker traffic prompted U.S. military action, setting off a procurement surge that analysts say could last years.
Lockheed Martin (LMT) is among the primary beneficiaries, with over 800 Patriot missile interceptors reportedly used in the conflict’s early weeks, and a landmark $59 billion Pentagon contract awarded in July to triple Patriot missile production over seven years.
RTX Corp. (RTX), which produces guidance systems for Patriot missiles, secured a $22.9 billion U.S. Navy contract in mid-August to produce Tomahawk cruise missiles, of which more than 1,000 have reportedly been fired at Iranian targets since Operation Epic Fury began in late February 2026.
Northrop Grumman (NOC) saw its B-2 Stealth Bomber deployed to strike Iranian nuclear complexes in a 34-hour round-trip mission, and the company signed two multi-year agreements worth $3 billion with the Pentagon and Lockheed Martin in August.
Those agreements are designed to triple PAC-3 MSE missile production and quadruple monthly deliveries of structural components for THAAD interceptors over seven years.
While individual contractors stand to gain, Zacks analysts caution that company-specific risks, including elevated valuations or unexpected earnings misses, make diversified ETF exposure a more prudent strategy.
The iShares U.S. Aerospace and Defense ETF (ITA), with net assets of $13.94 billion, holds exposure to 48 U.S. aerospace and defense companies and has gained 8.5% year to date, carrying a Zacks ETF Rank of 2, or Buy.
GE Aerospace holds the top position in ITA at 21.60% weight, with RTX at 17.23%, LMT at 4.67%, and NOC at 4.38%, making it a broadly diversified play on the sector.
The Invesco Aerospace and Defense ETF (PPA), valued at $8.16 billion, tracks 62 companies and has also gained 8.5% year to date, with RTX holding the top weight at 8.40% and LMT in fourth place at 6.59%.
The State Street SPDR S&P Aerospace and Defense ETF (XAR), with assets under management of $5.97 billion, offers exposure to 47 companies and has similarly risen 8.5% year to date, charging just 35 basis points in fees.
With global defense spending projected to reach $2.6 trillion by the end of 2026, analysts suggest these three ETFs offer investors a diversified and strategically sound entry point into a sector defined by sustained government demand.
