In recent years, as geopolitical tensions become an integral part of the global landscape, the defense industry has experienced unprecedented growth. The war between Russia and Ukraine, China’s rising assertiveness, and the ongoing conflict between Israel and terror organizations such as Hamas and Hezbollah have significantly boosted global demand for advanced defense systems. As a result, investors worldwide are increasingly turning their attention to defense companies—particularly those with proven technology, strong government ties, and stable revenue streams.

Israel – A Small Nation with a Powerful Defense Industry

Despite its modest geographic and demographic size, Israel is positioned as one of the leading defense powers in the world. The local industry is built on innovation, extensive operational experience, and rapid response to evolving threats. The three main companies leading Israel’s defense export market—Elbit Systems, Israel Aerospace Industries (IAI), and Rafael Advanced Defense Systems—have become dominant players in the global defense landscape, securing multi-billion-dollar contracts with countries across Europe, Asia, and the Americas.

Israel now ranks among the top 25 defense exporters globally, with annual defense exports surpassing $12.5 billion. Many of these firms are also publicly traded and have shown consistent growth in profitability and market value.

Among Israel’s most advanced technologies are the Iron Dome missile defense system, the multi-layered Arrow defense system, unmanned aerial vehicles (UAVs), satellite communications, and cutting-edge electronic warfare solutions. These systems not only protect Israeli citizens, but are also in high demand by nations seeking to address their own security challenges.

How War Drives Demand in the Defense Industry

No one wishes for war, yet the unfortunate reality is that conflict often fuels rapid growth in the defense sector. The October 2023 war in Gaza served as a live demonstration of Israel’s operational capabilities and technological superiority. Countries worldwide began to reassess their own defense readiness and realized the importance of quick-response, AI-powered, multi-layered defense systems.

Beyond the Middle East, escalating global tensions have led many countries to increase their defense budgets—creating fertile ground for Israeli and global defense exports. Israeli firms have secured landmark deals, some worth hundreds of millions of dollars, in recent months alone. This has translated into notable investor interest, with stock prices of key Israeli defense firms climbing significantly and defense-focused ETFs seeing increased inflows.

Top Global Defense Stocks: Where are the Opportunities?

In addition to Israeli firms, global equity markets offer compelling opportunities to invest in major international defense corporations that benefit from steady government contracts and long-term demand.

Here are three leading global defense stocks that are currently attracting investor attention:

1. Lockheed Martin (Ticker: LMT)

The American defense giant is the world’s largest weapons manufacturer and the producer of the F-35 stealth fighter jet. Operating in over 70 countries, Lockheed Martin generates more than $65 billion annually. Known for its financial resilience and long-term stability, the company offers consistent dividends and a strong growth trajectory.

2. RTX Corporation (formerly Raytheon Technologies)

A powerhouse in missile defense, battlefield communications, and radar systems, RTX has strong relationships with the U.S. Department of Defense and NATO allies. The company is also heavily invested in space and aerospace, offering diversification and technological depth. RTX’s growing focus on cybersecurity and AI warfare further strengthens its future outlook.

3. BAE Systems (Ticker: BAESY)

This UK-based conglomerate specializes in naval platforms, armored vehicles, autonomous weapons, and navigation systems. BAE benefits from close ties with the UK government and European Union defense bodies. With strong fundamentals and solid long-term contracts, BAE is viewed by analysts as undervalued relative to its growth potential.

Is Investing in the Defense Sector Worth It?

Defense companies are often seen as relatively stable investments, less exposed to traditional economic cycles since governments tend to prioritize defense budgets—even during recessions. However, the sector is not without its risks, which include political regulation, export controls, and dependency on government policy.

For investors seeking broader exposure with lower individual risk, several Exchange Traded Funds (ETFs) such as ITA or DFNS provide diversified baskets of global defense stocks.

Final Thoughts

The defense industry is not only a central player in global security but also a promising destination for investors looking for a balance of innovation, long-term demand, and financial stability. As the world becomes increasingly unpredictable, the need for robust defense solutions is growing—and Israel, with its battle-tested innovation, is at the epicenter of this demand.

Whether investing through Israeli companies like Elbit or through international giants like Lockheed Martin, RTX, or BAE Systems, the defense sector offers a strategic path forward for investors who understand its dynamics and are willing to navigate its complexities. The key is to assess your risk tolerance, time horizon, and belief in the future role of defense in global affairs.