2 Defense Stocks Set to Rise if the Iran War Drags On

What started off with diplomatic friction over Iran's nuclear ambitions last summer has swiftly evolved into a complex web featuring escalating tensions within the Middle East as well as dissent from the country's civilian population.

The ongoing conflict has so far lacked ground invasions. Beyond drones and rocket launches, the Iran War has put cyberattacks and intelligence operations on full display. This situation underscores how warfare is shifting toward technology-driven attacks.

Below, I'll explain how Palantir Technologies (NASDAQ: PLTR) and CrowdStrike (NASDAQ: CRWD) are playing pivotal roles -- providing critical defense-tech services to the U.S. military and its allies amid this volatile landscape.

Image source: Getty Images.

1. Palantir plays an important role in defense intelligence and surveillance

While Palantir's software is often touted by Fortune 500 companies, the company's roots are actually in counterterrorism. Palantir's data integration platforms -- Foundry and Gotham -- have long been a hallmark at the Pentagon.

The company's software specializes in aggregating data from a host of different sources -- including satellite imagery, social media signals, flagging suspicious financial transactions, and even communications -- to create actionable intelligence.

In the context of the Iran War, Palantir's tools help the U.S. and its allies -- namely Israel -- create thorough maps of influential networks in the region and predict or simulate possible further escalations.

Palantir's ontology system allows officials at the Department of Defense (DOD) to connect dots beyond our own borders. For example, the company's artificial intelligence (AI) capabilities can be used to identify patterns in Iranian arms shipments or explore confrontations in key trade routes such as the Strait of Hormuz.

In turn, the U.S. and its allies can make data-driven decisions in a more timely fashion to enhance the military's defense posture in the region.

Image source: Getty Images.

2. CrowdStrike is a leader in cyber defense

Iran is home to a number of state-sponsored cyber warfare groups including Refined Kitten and Charming Kitten. CrowdStrike's expertise in endpoint security and threat detection complement Palantir's efforts on the digital frontlines.

As tensions in Iran heat up, both of these cyber organizations have targeted critical infrastructure across the U.S., Israel, and Europe through a combination of malware and phishing campaigns. CrowdStrike's Falcon platform safeguards organizations by countering cyber threats through real-time detection, behavior analysis, and automated responses.

So far, researchers at CrowdStrike have been able to attribute recent cyber attacks against the U.S. to operations in Tehran as well as supporters of Iran -- including Russian hacker group, Z-Pentest. This is important, as CrowdStrike's ability to identify Iran's digital fingerprints can help strengthen international coalitions combating cyber espionage against the U.S. and its allies.

Palantir and CrowdStrike are durable long-term winners

If the war in Iran drags on, Palantir and CrowdStrike are uniquely positioned to benefit from increased defense spending. Palantir's data analytics and CrowdStrike's comprehensive cybersecurity suite provide the military with the strategic assets it needs to marry operations from the desktop to the battlefield.

An analysis exploring how war affects stocks conducted by The Motley Fool found that large-cap stocks rose 12% on average across decades featuring major geopolitical conflict. This brings up an important point: While Palantir and CrowdStrike are acutely relevant at the moment, their long-run appeal transcends the Iran War.

Both Palantir and CrowdStrike have built diversified, versatile platforms with applications in numerous commercial sectors. In other words, neither company is a one-trick pony dependent on activity in the defense industry.

Moreover, as software businesses, Palantir and CrowdStrike also benefit from high-margin, recurring revenue models. This provides each company with greater visibility relative to traditional defense contractors, which often experience lumpy growth due to the mechanics of deals flowing from the public sector.

These dynamics make Palantir and CrowdStrike resilient in the face of market volatility -- demonstrating their proficiency across wartime operations and their ubiquity in commercial applications within data-centric ecosystems.

Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends CrowdStrike and Palantir Technologies. The Motley Fool has a disclosure policy.