The U.S. Has 9 Damaged Military Bases to Rebuild in the Middle East. Is Now the Time to Buy Defense Stocks?
The U.S. Has 9 Damaged Military Bases to Rebuild in the Middle East. Is Now the Time to Buy Defense Stocks?
Patrick Sanders, The Motley FoolFri, May 1, 2026 at 5:11 PM UTC
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Key Points -
The U.S. has reportedly spent $25 billion so far in the Iran war, and asked Congress for $200 billion.
It is also seeking a 42% increase in its annual budget to $1.5 trillion.
Many top defense stocks are down in the last three months.
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The ongoing war in Iran is putting a spotlight on the defense industry -- major companies like Northrop Grumman (NYSE: NOC), Lockheed Martin (NYSE: LMT), RTX (NYSE: RTX), and General Dynamics (NYSE: GD) earn billions of dollars every year through military contracts. Trading volume in these names jumped as the war began in late February.
LMT 30-Day Average Daily Volume Chart
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LMT 30-Day Average Daily Volume data by YCharts
But so far, it's not helped the stock price. Lockheed Martin stock is down 18% in the last three months, while Northrop Grumman is down 17% and RTX dropped 13%. General Dynamics has so far bucked the trend with just a 1% loss over the last 90 days.
Now there's a new factor to consider -- a report that the military has nine bases in the Middle East that have been damaged in the war, as well as U.S. radar systems and other equipment. While the Pentagon told Congress that the war has so far cost about $25 billion, but that doesn't include repairs to military bases.
How should investors be looking at defense stocks right now?
A map of Iran and the Middle East
Image source: Getty Images.
Defense is a mixed bag
There are many reasons defense stocks should be going up. For example, the U.S. air campaign has drawn on its munitions supply. The Center for Strategic and International Studies reports that the Pentagon has used about half of its supply of Patriot missiles, 50% of its Terminal High Altitude Area Defense (THAAD) interceptors, and 45% of its precision strike missiles in Iran. Replacing them could take up to four years.
The Pentagon earlier this year asked for a $200 billion appropriation to fund the Iran war, and it is also asking Congress to increase the 2027 budget to $1.5 trillion -- a mammoth 42% increase from 2026 spending. Some of that funding always goes to defense contractors, and it tends to do so in big chunks, such as a $4.8 billion award to Lockheed Martin in April for Patriot missiles.
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However, it's also important to know that the Pentagon may not do things the same way it's always done them. Companies like Palantir Technologies (NASDAQ: PLTR) are becoming increasingly important to the Pentagon because its artificial intelligence-powered software can help military commanders make decisions about how to use munitions. The Pentagon is making Palantir's Maven Smart System an "official program of record" and plans to award the company a $2.3 billion contract to expand it.
In short, advancing technology is changing the way the military spends its budget.
There's also no telling how the damage to U.S. bases in the Middle East will affect defense contractors. Jules "Jay" Hurst III, who is acting as the Pentagon's comptroller, told reporters this week that it's not yet known how or if the military will rebuild its bases.
How to trade defense stocks now
Analysts are showing considerable caution in the space these days. Analysts at Morgan Stanley lowered their price target for Lockheed Martin from $675 to $653; a UBS analyst lowered the target for Northrop Grumman from $806 to $745, and RTX's target from $209 to $199.
While I do think there's long-term value in Lockheed Martin and RTX in particular for their work on the Patriot and Tomahawk missile systems, I think these companies will be volatile in the short term, and the news about damaged military bases doesn't move the needle. But all of these defense stocks pale in comparison to the potential of Palantir stock, which I think will outperform them over the next several years.
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Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies and RTX. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
Source: “AOL Money”
