7 Defense Stocks Rally As US-Iran Conflict Risk Spikes
U.S. defense stocks surged Wednesday after reports signaled the Donald Trump administration is edging closer to potential military action against Iran, while prediction markets sharply repriced the odds of a strike within weeks.
The SPDR S&P Aerospace & Defense ETF (NYSE:XAR) gained 2%, while the Global X Defense Tech ETF (NYSE:SHLD) rose 2.7%, outpacing the broader market.
The move followed an Axios report stating the U.S. could be on the brink of a major Middle East conflict.
According to sources familiar with the matter, a potential U.S. military strike on Iran could begin "very soon" and develop into a sustained, weeks-long campaign, possibly in coordination with Israel.
Military Presence Expands
Axios reported the administration expanded its military footprint in the region. The buildup includes two aircraft carriers, multiple warships, hundreds of fighter jets and advanced air defense systems.
More than 150 U.S. military cargo flights transported weapons and ammunition to the Middle East. Dozens of additional fighter jets were deployed within 24 hours.
Diplomatic talks between U.S. and Iranian officials showed limited progress, according to the report. Vice President JD Vance said diplomacy could reach its "natural end" if Iran fails to meet U.S. red lines tied to its nuclear program.
Prediction Markets Flash Warning
Prediction markets reflected rising expectations of escalation. On Polymarket, betting-implied odds on the timing of a U.S. attack in Iran jumped sharply.
Odds of action by Feb. 21 rose 8 percentage points on the day to 20%. By Feb. 28, the probability was priced at 38%.
Odds of a strike by March 15 saw a 28 percentage-point spike to 55%, while contracts forecasting action by June 30 climbed 15 percentage points to 67%.
Seven Stocks Lead Gains
Among individual movers within the aerospace and defense sector on Wednesday:
- Intuitive Machines Inc. (NASDAQ:LUNR) surged 9.30%.
- Red Cat Holdings Inc. (NASDAQ:RCAT) gained 8.24%.
- Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS) advanced 8.01%.
- Rocket Lab Corp. (NASDAQ:RKLB) climbed 8.04%.
- Redwire Corp. (NYSE:RDW) rose 7.56%.
- Mercury Systems Inc. (NASDAQ:MRCY) added 5.37%.
- Karman Holdings Inc. (NYSE:KRMN) increased 5.11%.
Photo: Shutterstock
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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