While the rest of the market is getting hammered by the Iran conflict, one corner of Wall Street is throwing a party. Defense stocks are surging — and the numbers suggest this trade has a lot more room to run.
Palantir (PLTR) spiked roughly 4% at Monday’s open, hitting $143 a share as traders piled into what’s become the quintessential “war trade.” But Palantir isn’t alone. Northrop Grumman (NOC) and RTX both jumped about 4%, while Lockheed Martin (LMT) climbed 3%. The iShares US Aerospace & Defense ETF (ITA) is now up 14% in 2026 — and the year is barely two months old.
The reason is simple: the U.S.-Israeli strikes that killed Iran’s Supreme Leader over the weekend didn’t just escalate tensions. They confirmed something the market had been pricing in all year — that American military spending is on a permanently higher trajectory. Between the Venezuela operation, NATO’s continued expansion, and now a full-blown confrontation with Iran, the Pentagon’s budget is functionally uncapped.
Palantir is the standout because it sits at the intersection of two mega-trends: defense and artificial intelligence. The company’s AI-powered intelligence platform is reportedly being used to coordinate targeting and logistics in the current Iran operations. That’s not speculation — it’s the core of what Palantir was built to do. Q4 revenue was up 70% year-over-year, and EPS jumped 79%. This isn’t a meme stock riding geopolitical fear. It’s a company whose product is literally more valuable every time a new conflict erupts.
But here’s the part most traders are missing: even if the Iran situation de-escalates quickly, the defense spending cycle doesn’t reverse. Lockheed’s backlog is at record levels. RTX is booking orders from European NATO allies at a pace not seen since the Cold War. And Northrop Grumman’s B-21 Raider program is just entering its production ramp.
The broader market may be running scared today. But defense names are operating in a parallel universe where every escalation is a catalyst and every de-escalation just locks in the spending already committed. If you’re looking for the sector that wins regardless of how the geopolitical chess game plays out, it’s the one building the pieces.