US defense stocks decline in March despite ongoing war

Defense equities in the United States have experienced a notable decline despite the ongoing war with Iran, suggesting that the traditional market surge associated with geopolitical conflict may have peaked prematurely. Analysts indicate that investors had already priced in significant escalations prior to the recent military actions, leading to a "sell-on-news" environment as the conflict unfolded. The NYSE Arca Defense index, which tracks 34 major and mid-sized domestic firms, retreated nearly 8% throughout March. This performance lagged behind the broader S&P 500, which fell 5% in the same period. This trend stands in stark contrast to the market reaction seen when Russia launched its invasion of Ukraine in February 2022, a period during which the defense index climbed approximately 12%.