Al Root
President Donald Trump has flipped the script and is now choosing to choke off global oil demand in hopes of forcing Iran to make a deal.
Defense stocks were mostly higher in early trading on Monday after the events of the weekend.
"The U.S. and Iran failed to reach an agreement in their very brief talks over the weekend," wrote Vertical Research Partners analyst Rob Stallard in a Monday note. "In response, the U.S. Government has announced that it will blockade Iranian ports, adding to the selective Iranian blockade of the Strait of Hormuz."
The U.S. previously wanted the strait open to traffic to ease pressure on oil prices, since the waterway is a key shipping lane for crude oil.
The reversal signals the U.S. might be trying to squeeze the Iranian economy, which is heavily dependent on oil revenue. It's essentially a siege, designed to drain Iran of resources. It, for instance, won't be able to collect tolls on oil tankers traversing the strait. Sieges, however, typically take a long time to work. AeroDynamic Advisory managing director Richard Aboulafia told Barron's he doesn't believe it will work as intended.
Iran is also getting military support from China and Russia, notes Stallard. That could help Iran extend the conflict, which is now more than 40 days old.
Lockheed Martin shares were up 0.5% in premarket trading. Northrop Grumman and L3Harris Technologies stocks were up 0.6% and 0.1%, respectively. General Dynamics stock was up 0.9%, while S&P 500 and Dow Jones Industrial Average futures were down 0.6% and 0.5%, respectively, as benchmark international crude oil prices rose about 7%, north of $102 per barrel.
Coming into Monday trading, those four shares were down about 6% since the start of fighting in Iran, roughly the same drop for the iShares Aerospace & Defense ETF. To be sure, global conflict means higher military spending, which is a boon to sector stocks, but defense shares are already elevated, and war also adds uncertainty that investors don't like to deal with.
The four defense contractor stocks were up an average of 34% over the past 12 months, coming into Monday trading. The iShares ETF was up 54%.
Investors will hear more about the war, military spending, and Iran outlooks when defense contractors report first-quarter earnings in the coming weeks.
"We expect optimism from U.S. managements," wrote Capital Alpha Partners analyst Byron Callan in a Monday report, citing the recent $1.5 trillion fiscal year 2027 budget request and replacement demand for missiles and drones. He recommends investor focus on whether companies are sizing their workforces and supply chains for the passage of the full request.
RTX and Northrop report earnings on Apr. 21. Lockheed Martin reports on Apr. 22, with Boeing following on Apr. 23. General Dynamics and L3Harris report results on Apr. 29 and 30, respectively. All are expected to produce year-over-year sales growth.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 13, 2026 08:34 ET (12:34 GMT)
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