Iran Peace Deal: What Does It Mean for Defense Stocks Like Lockheed Martin?

The general assumption is that a peace deal between the United States and Iran will hurt defense stocks. But it's not that simple. In fact, it's not really about whether the fighting stops now. It's about whether governments will continue spending on defense over the next decade.

It's not just one war

Lockheed Martin (NYSE: LMT) has long benefited from demand for defense systems during peacetime and wartime. Over the past 40 years, shares of Lockheed Martin have climbed 2,500%. And while there hasn't been a complete lack of military conflict over the last four decades, the military demands have varied. Yet that has never changed the long-term trajectory of the stock.

In 2025, the company ended the year with a record backlog of approximately $194 billion, giving it years of contracted work already in hand. Lockheed also generated $75 billion in revenue during 2025, up about 6% from the prior year. Management expects sales to climb to between $77.5 billion and $80 billion in 2026.

That is not trivial, and an end to the war with Iran won't suddenly erase existing orders for fighter jets, missile-defense systems, helicopters, satellites, and other military hardware. In fact, many of Lockheed's most important programs don't rely on any single conflict.

Image source: Getty Images.

Take the F-35, for example, which remains the backbone of air forces around the world. Lockheed delivered a record 191 F-35 aircraft in 2025, and the company still has hundreds of aircraft remaining in its production backlog.

Meanwhile, recent events in the Middle East have highlighted the importance of missile defense, as Iran's extensive use of ballistic missiles has reinforced demand for systems such as THAAD (Terminal High Altitude Area Defense) anti-ballistic missile defense system and Patriot interceptors.

In January, Lockheed signed an agreement with the Pentagon that could increase THAAD interceptor production capacity from 96 missiles annually to as many as 400. That's not an insignificant increase. And that's why you should not assume that peace automatically translates into lower defense spending.

In some cases, the opposite can happen. Countries that witnessed the conflict, for example, may decide they now need larger missile inventories, stronger air defenses, and more advanced surveillance capabilities.

In fact, Forecast International recently estimated that more than $21 billion in prospective foreign military sales involving Lockheed Martin and RTX Corporation (NYSE: RTX) were approved for Middle Eastern partners during the first quarter of 2026 alone.

We've been here before

Reports indicate this latest deal establishes a 60-day ceasefire framework and begins discussions regarding Iran's nuclear program. However, major issues remain unresolved, including Iran's ballistic missile capabilities, regional proxy forces, and longer-term security arrangements.

In other words, geopolitical risk hasn't disappeared. It's simply changed form. Of course, this doesn't mean defense stocks are immune to downside risk. If the ceasefire evolves into a durable diplomatic settlement and tensions continue to ease across the region, some investors may rotate away from defense contractors and toward sectors that benefit more directly from lower energy prices and improving economic growth.

But for Lockheed Martin, the bigger story remains demand visibility. A company with nearly $194 billion in backlog doesn't rely on a single conflict to justify its valuation. Multiyear procurement programs, international defense partnerships, and modernization efforts across Europe, Asia, and the Middle East all support the business.

So while the Iran peace deal may reduce some of the near-term urgency that helped drive defense spending earlier this year, it probably doesn't change the long-term investment thesis for Lockheed Martin. If anything, the conflict may have reinforced the reasons many countries continue to invest heavily in missile defense, advanced aircraft, and military readiness. And those remain some of Lockheed Martin's most important businesses.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends RTX. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.