If you hold US defense stocks, the three weeks since February 28 have been among the best-performing stretches of the decade. For US investors specifically: defense stocks are one of the few corners of the equity market generating non-correlated upside right now. While the S&P 500 faces pressure from Fed rate holds, oil-driven inflation, and consumer sentiment decline, defense contractors run on government spending — not consumer demand. Understanding the mechanics well enough to know where the real money is concentrated and how long the trade historically holds is the task at hand.

What Has the Pentagon Actually Spent in Three Weeks?

Based on DoD press briefings and open-source strike package tallies through March 19, 2026, the US military has expended an estimated $9–12 billion in munitions and direct operational costs in the first three weeks. The largest single line item is Tomahawk Land Attack Missiles (TLAMs), manufactured by Raytheon at approximately $2.1 million per unit. Strike packages targeting Iranian nuclear infrastructure, IRGC command nodes, and air-defense batteries have drawn heavily on TLAM stocks.

Additional expenditures include AIM-120 AMRAAM air-to-air missiles (RTX, ~$1.5M each), SM-3 Block IIA ballistic missile interceptors (RTX/Boeing joint, ~$27M each) deployed from Arleigh Burke-class destroyers in the Gulf of Oman, and JDAM precision guidance kits (Boeing, ~$25,000 per unit in volume). The SM-3 expenditure alone could represent $2–3 billion given the volume of Iranian ballistic missile salvos intercepted.

The $2.8 billion initial supplemental covers immediate operational cost reimbursement and a first tranche of munitions replenishment. The main event is the full supplemental — modeled by defense analysts at Cowen and RBC Capital Markets at $40–60 billion, expected to clear Congress within 60–90 days. See our analysis of the full economic cost of the Iran war and Hormuz closure for the broader macro picture.

Which Contractors Win the Most?

Is Lockheed Martin (LMT) the Broadest Play?

Yes. LMT has the widest revenue exposure of any single contractor. The F-35 fleet conducting strike missions generates immediate spares and maintenance demand. More significantly, LMT manufactures the JASSM-ER (Joint Air-to-Surface Standoff Missile Extended Range) at approximately $1.3 million per unit — the weapon of choice for deep-penetration strikes against hardened Iranian facilities. Production currently runs at roughly 550 units per year; the DoD will almost certainly request a surge to 900–1,100 annually, representing a revenue increase of $450–715 million per year in this product line alone. LMT also manufactures the PAC-3 Patriot interceptor at approximately $5.9 million per unit, with Israel, Saudi Arabia, UAE, and Qatar all signaling urgent resupply. LMT closed near $625 on March 19, 2026, up roughly 22% since February 28.

Why Is RTX the Purest Munitions Story?

RTX is the single most direct munitions play. Tomahawk missiles, AIM-120 AMRAAMs, SM-3 interceptors, and the Iron Dome Tamir interceptor (co-produced with Israel’s Rafael Advanced Defense Systems) are all RTX products. Each Tamir interceptor costs roughly $50,000–80,000, and Israel has been firing them at rates exceeding 1,000 per week during peak Iranian drone and rocket salvos. Critically, the US government funds Israeli Iron Dome resupply via Foreign Military Financing (FMF) grants — meaning RTX gets paid by the US Treasury regardless of Israeli budget constraints. RTX shares are up approximately 19% since February 28, trading near $142.

What Is Northrop Grumman’s Angle?

NOC’s competitive moat is stealth and ISR (intelligence, surveillance, reconnaissance). The B-21 Raider stealth bomber program has almost certainly been accelerated. NOC’s dominance in SIGINT platforms and electronic warfare makes it a sustained beneficiary of high-tempo operations rather than a one-quarter pop. The company is up approximately 17% since February 28, trading near $540.

Is General Dynamics the Catch-Up Trade?

GD’s +15% gain is the smallest of the four majors, explainable by the 60–90 day lag in conventional munitions replenishment cycles relative to air-delivered precision weapons. Bath Iron Works (Arleigh Burke destroyers) has seen accelerated delivery pressure but shipbuilding contracts do not reprice quarterly. When ground-based munitions resupply becomes the dominant narrative in weeks 5–12, GD is positioned to catch up — potentially making it the better entry point at this stage of the trade.

Which ETFs Offer the Best Exposure?

ITA (iShares U.S. Aerospace and Defense ETF) — The institutional default. Top holdings: LMT 18%, RTX 17%, NOC 12%, GD 8%, Boeing 8%. AUM approximately $8.2 billion, expense ratio 0.40%. Up approximately 14% since February 28, 2026. Most liquid, most diversified vehicle in the sector.

XAR (SPDR S&P Aerospace and Defense ETF) — Equal-weighted, giving more exposure to mid-cap supply chain names: Curtiss-Wright, Mercury Systems, Heico. Useful for capturing the broader supply chain surge. Up approximately 11% since February 28. Lower AUM ($2.1B) means slightly wider bid-ask spreads.

PPA (Invesco Aerospace and Defense ETF) — Market-cap weighted, up approximately 13% since February 28. Includes some commercial aerospace exposure that dilutes the pure defense trade.

DFEN (Direxion Daily Aerospace and Defense Bull 3X ETF) — Up approximately 50% since February 28, but appropriate only for traders with positions of 30 days or less. Volatility decay in sideways-to-down markets destroys gains rapidly. Not a long-term holding instrument.

How Long Does the War Premium Last Historically?

Defense outperformance during conflicts follows a consistent pattern: sharp initial surge in weeks 1–4, consolidation in weeks 5–12, then a second leg up when supplemental funding is formally appropriated. Post-9/11, the defense rally lasted approximately 18 months. The Ukraine-driven rally lasted roughly 24 months for prime contractors before normalizing.

The Iran conflict introduces unique variables. An air campaign without ground troops allows for faster diplomatic resolution — compressing the multi-year growth narrative. Expansion to naval blockade or proxy ground elements in Iraq/Syria extends the timeline significantly. The key indicator: watch Hormuz transit status — every week the strait remains closed adds to operational tempo and munitions burn. The base institutional case is defense outperformance through Q3 2026, with JASSM-ER and Tomahawk production ramp providing earnings visibility through 2028–2029 regardless of conflict resolution. For the Gulf states’ economic response, see the Iran war’s economic impact on Gulf states and oil prices.

The defense trade thesis is intact and has a second leg coming when the Congressional supplemental clears. LMT and RTX are the highest-conviction names for munitions replenishment. GD is the catch-up trade within the sector. ITA remains the cleanest vehicle for investors who want sector exposure without single-stock concentration risk.