Meanwhile, five of Asia's largest defense sector companies recorded an average share-price increase of 40% this year through March 19 and 57% in 2025. South Korea's Hanwha Systems Co. Ltd. recorded the largest stock price increases in 2025 and thus far in 2026, rising 146% and 150%, respectively. The company's annual revenue in 2025 grew 31% year over year, though its net profit declined 52%, according to an investor presentation.
"In Asia, performance has been more mixed as some exporters benefit from rising demand, but broader equity markets are more influenced by macro conditions than defense-specific tailwinds," Callahan said.
The five largest defense companies in the Middle East posted an average stock price increase of nearly 59% so far this year. This compares to an average gain of 110% at the start of the most recent Israel-Hamas conflict in 2023 and 164% in 2025.
Trends in US, Europe
Defense stocks in the US and Europe have both rallied since 2022, coinciding with the start of the Russia-Ukraine conflict and boosted by increase defense budgets and additional geopolitical tensions.
The European defense sector has outperformed the US defense sector since the start of 2022, with the STOXX Europe Total Market Aerospace & Defense Index surging 234% relative to a 131% increase for the US-focused S&P Aerospace & Defense Select Industry Index as of March 19, 2026. In 2025, the European index's gain of 57% exceeded the US index's gain of 46%.
However, the trend has flipped so far in 2026, with the US index up 11% through March 19, compared with a 3% gain for the European index.
"Though funds holding European defense stocks have outperformed in recent years, they have been weaker in recent months," Scott Sacknoff, president of SPADE Indexes and index manager of the SPADE Defense Index, said in an interview. "Gains in certain stocks bought on the news of higher defense spending have led to some investors waiting to see if the contract activity leads to increases in revenues and profits that justify the new multiples in share prices."
Meanwhile, the upside for US defense stocks is likely to persist this year regardless of the timeline of the current conflict in the Middle East.
"Valuations will continue to be buoyed by strong support for defense spending increases from the Trump administration and the general global geopolitical risk across multiple regions," Andre Madrid, vice president and aerospace and defense analyst at BTIG, said in an interview.
The broader US defense sector will also benefit from the US government's push to develop more resilient defense supply chains, diversify suppliers and integrate new technologies and software into its procurement, Madrid said.
Shares of Lockheed Martin Corp. climbed 32% this year through March 19, leading the five largest US defense companies. The company ended 2025 with a record order backlog of $194 billion and reported a 6% increase in year-over-year sales, Chairman, President and CEO James Taiclet said during a January earnings call.
Lockheed Martin's stock price rose nearly 3% on March 2, the first trading day after the joint US-Israeli strikes in Iran.
Northrop Grumman Corp.'s stock price followed Lockheed Martin, rising 25% through March 19. The company's hares rose 6% on March 2.
In Europe, Germany's Rheinmetall AG led the region's largest defense companies with a stock price increase of 188% in 2025. However, the UK's BAE Systems PLC leads this year with a 34% gain through March 19, while Rheinmetall's shares are down 3%.
Charles Woodburn, BAE Systems' group CEO and executive director, said the company was well positioned to provide systems and technologies "in a new era of defense spending, driven by escalating security challenges," according to an earnings report statement Feb. 18.
