US-Iran war: Dassault Aviation, Lockheed Martin to Avic Chengdu Aircraft — global defence stocks rise up to 7.5%

Global defence stocks witnessed sharp gains on Monday, March 2, as escalating hostilities between the United States and Iran triggered renewed investor interest in military and aerospace names. While broader equity markets turned volatile, defence stocks emerged as clear outperformers.

The rally was driven by expectations that prolonged geopolitical tension could lead to higher defence spending and increased demand for military equipment, systems and components.

US defence major Lockheed Martin surged 7.5% in intraday trade. China’s Avic Chengdu Aircraft advanced 4.5%, while France’s Dassault Aviation climbed 4.2%. Shares of Xi’an Triangle Defense also rose 3.26%, reflecting broad-based buying across global defence manufacturers.

Defence stocks typically react positively during periods of military conflict, as governments often ramp up procurement, replenish inventories and accelerate modernization programs.

Escalation in the Middle East Fuels Defence Buying

The conflict intensified over the weekend after coordinated strikes by the US and Israel targeted Iran. Reports indicated that the strikes resulted in the death of Iran’s Supreme Leader Ayatollah Ali Khamenei, escalating tensions significantly and injecting fresh uncertainty into global financial markets.

Iran retaliated swiftly, launching missile attacks against Israel and targeting US military bases and strategic installations in Qatar, the United Arab Emirates, Kuwait and Bahrain. The widening scope of military action heightened fears of a broader regional confrontation.

The developments triggered volatility across asset classes, including commodities, with oil prices reacting sharply amid concerns over potential supply disruptions.

While short-term equity volatility remains elevated, defence stocks often act as relative safe havens during geopolitical crises, benefiting from expectations of sustained military demand.

Global Markets Under Pressure

Broader equity markets reacted negatively to the escalation.

European indices opened sharply lower. Germany’s DAX fell 2.2% to 24,737.47. France’s CAC 40 dropped 1.9% to 8,413.91, while the UK’s FTSE 100 declined 1% to 10,800.63.

Asian markets were also largely weak, although Shanghai bucked the trend. The Shanghai Composite gained 0.5% to close at 4,182.59, supported by a rally in oil-related counters such as CNOOC, China Petroleum & Chemical and PetroChina, which rose to their 10% upper limits following higher crude prices.

Hong Kong’s Hang Seng index declined 2.1% to 26,059.85.

Japan’s Nikkei 225 initially fell more than 2% but recovered partially to close 1.4% lower at 58,057.24. Defence-linked Japanese stocks, including Mitsubishi Heavy Industries and IHI Corp., posted gains, helping offset broader market losses.

Australia’s S&P/ASX 200 ended flat at 9,200.90.

In India, where heightened tensions could disrupt oil supplies, the Sensex fell 2.1% amid concerns over energy security and rising crude prices.

Elsewhere in Asia, Taiwan’s benchmark index declined 0.9%, Singapore’s market dropped 2.3%, and Thailand’s SET index — particularly sensitive given its tourism exposure to the Middle East — fell 3.1%.