Escalating military actions between the U.S., Israel, and Iran over the weekend have sent shockwaves through global markets, triggering a pronounced risk-off shift. In response, traditional safe-haven assets and sectors tied to conflict saw significant movements. The price of Brent crude oil surged nearly 10% overnight, while gold rose and the U.S. dollar strengthened. U.S. stock futures fell more than 1% as investors braced for potential extended conflict and rising energy costs.
Defense contractors emerged as primary beneficiaries of the geopolitical uncertainty. RTX Corporation (formerly Raytheon) saw its stock jump approximately 6.6% in premarket trading Monday, reaching $215.80. This surge was mirrored across the defense industry, with Lockheed Martin climbing 6.9%, Northrop Grumman rising 5.8%, and the iShares U.S. Aerospace & Defense ETF (ITA) trading higher. The ITA defense ETF has risen 35% since a previous U.S. strike on Iran's nuclear facilities in June 2025.
The market reaction is underpinned by strong fundamentals from key defense players. RTX recently reported robust Q4 2025 earnings, with EPS of $1.55 beating estimates of $1.47 and revenue of $24.24 billion representing a 12.1% year-over-year increase. The company also set optimistic FY2026 EPS guidance of $6.60–$6.80, well above the analyst consensus of ~$6.11. Similarly, UK-based BAE Systems reported annual revenue exceeding £30 billion and a growing backlog of over £63 billion.
The conflict has also reignited the energy sector. Beyond the surge in Brent crude, companies like Shell and Centrica (parent of British Gas) saw their stock prices climb. Analysts cite concerns that a widening conflict could disrupt key energy export points, like Qatar's recent shutdown, leading to sustained higher prices for oil and natural gas.
"At least in the short term, the disruption to global energy supply is substantial," said Michael Langham, emerging markets economist at Aberdeen Investments. The situation has prompted speculation of increased future defense spending, with former President Trump hinting at boosting the U.S. defense budget to over $1.5 trillion.
