The stocks of defence contractors are up sharply as the military conflict between Israel and Hamas escalates.
Shares of Lockheed Martin (LMT) are up 4.9% in premarket trading, while the stock of Northrop Grumman (NOC) is up 4.3%. Other defence stocks are also up between 2% and 4% in early market action.
The price increases come after Hamas militants attacked Israel on October 7. The Israeli government has declared a state of war, and its military troops have since crossed the Gaza border and into Palestinian controlled territory.
The sharp and sudden rise in their share prices has lifted the collective market capitalization of U.S. defence stocks by $500 billion U.S.
A prolonged military conflict could lead to a sustained rally in U.S. defence stocks. However, a shorter conflict will likely see defence shares give back their current gains.
The jump higher comes after a prolonged slump for American defence stocks. Among large-cap U.S. defence stocks, only Boeing’s (BA) shares are up over the last 12 months.
As a group, U.S. defence stocks have fallen about 14% over the last year, while the benchmark S&P 500 index is up about 19% during the same period.