NEW YORK — Defense sector shares are poised for heightened scrutiny when U.S. markets reopen Monday, following a series of strikes against Iran over the weekend. The geopolitical escalation has injected fresh volatility into markets, placing aerospace and defense contractors at the center of investor attention alongside concerns over energy prices and global supply chains.
Market Reaction and Key Movers
As trading closed on Friday, major defense contractors finished in positive territory. RTX (formerly Raytheon Technologies) saw its shares climb 2.52% to settle at $202.62. Peers Lockheed Martin and Northrop Grumman advanced 2.56% and 1.90%, respectively. This outperformed the broader S&P 500 index, which declined 0.43% for the session.
The iShares U.S. Aerospace & Defense ETF (ITA) concluded the day at $243.72, narrowly missing its 52-week peak of $243.92. The sector's strength came amid reports that Israeli forces were responsible for a strike that killed Iran's Supreme Leader, Ali Khamenei. Iran retaliated with missile launches targeting Israel and several Gulf states hosting U.S. military facilities, including Kuwait, Qatar, the United Arab Emirates, and Bahrain. Iranian authorities also declared the strategic Strait of Hormuz closed, a vital chokepoint for global oil shipments.
Oil and Broader Market Implications
The geopolitical shockwaves immediately impacted commodity markets. Brent crude oil futures jumped approximately 2% on Friday, closing at $72.48 per barrel. Analysts at Barclays noted that a significant disruption to supply could push Brent toward $80, while estimating a current "risk premium" of $3 to $5 per barrel embedded in prices. This premium remains highly sensitive to actual supply chain flows.
Market participants are weighing a complex interplay of factors. While defense names may attract flows as a perceived safe haven or direct beneficiary, a sustained oil price spike could dampen overall risk appetite and pressure equity markets broadly. Furthermore, aerospace supply chains, already under strain, face additional scrutiny. Industry analysts have highlighted worsening shortages of rare-earth materials, a critical input for various technologies, as a key watch item for engine manufacturers.
RTX's Dual-Pronged Business Exposure
The situation presents a nuanced setup for RTX, given its exposure to two major, and currently volatile, business lines: missile systems and jet engines. The company's Raytheon segment is a pivotal supplier of munitions, including the Tomahawk cruise missile. Earlier this month, Raytheon secured a significant seven-year contract with the U.S. Department of Defense aimed at dramatically accelerating production of Tomahawks and other munitions to replenish dwindling stockpiles. The agreement envisions increasing annual Tomahawk output from roughly 60 missiles to a target of 1,000.
Concurrently, RTX's Pratt & Whitney division is a major supplier of engines for both commercial aviation and military aircraft. This segment recently received a boost from Delta Air Lines, which announced an order for 34 additional Airbus A321neo jets, bringing its total orders for the model to 189. Deliveries are scheduled to begin in 2029, and the aircraft will be powered by Pratt & Whitney's geared turbofan engines.
Analyst Outlook and Technical Levels
According to a survey of analysts by Investing.com, the average 12-month price target for RTX shares stands at $216.92, with estimates ranging from a low of $179 to a high of $238. The stock is currently trading near the upper end of its 52-week range of $112.27 to $206.73. Traders are monitoring whether the stock can challenge new highs or will retreat toward levels seen earlier in the week.
The immediate catalyst for markets will be developments over the weekend regarding shipping traffic in the Strait of Hormuz and any further movements in oil prices. Additionally, early indications of new defense procurement orders or accelerated activity within the defense industrial supply chain could set the tone for Monday's trading session. However, the trade dynamic remains fluid; a de-escalation of hostilities or a sharp, risk-off reaction to spiking energy costs could quickly limit upside for defense equities.
As of the market close on Friday, February 28, 2026, all eyes are firmly fixed on the Middle East, with investors preparing for a week likely to be dominated by headlines from the region and their ripple effects across global defense, energy, and equity markets.
