US stock markets staged a strong recovery on Monday, with the S&P 500 and Nasdaq erasing all losses triggered by the Iran war as investors bet on a potential US-Iran deal. The Dow Jones Industrial Average gained 0.63% (301.68 points) to close at 48,218.25, while the Nasdaq Composite rose 1.23% (280.84 points) to 23,183.74. The advance pushed both indexes above pre-war levels from late February, reflecting rapid sentiment recovery following a temporary ceasefire last week and the start of earnings season. Technology shares led gains after President Trump told reporters that Iran "would like to make a deal very badly," helping offset earlier unease over a new US naval blockade on Iranian ports.
Three Asian defense stocks have emerged as global leaders in the sector's recent rally. According to reports from Bloomberg, South Korea's Hanwha Systems Co. and LIG Defense & Aerospace Co., along with Japan's Astroscale Holdings Inc., rank among the top five defense performers worldwide this year. The rally reflects a broader global arms buildup sparked by the Iran war, with investors viewing defense as a longer-term growth story rather than a short-term geopolitical trade.
Asian defense producers are benefiting from structural advantages in the global market. As reported by Bloomberg, Sam Konrad, investment manager at Jupiter Asset Management in Singapore, noted that many governments worldwide haven't been spending high proportions of GDP on defense for several decades. Wei Li, global chief investment strategist at BlackRock, emphasized that defense is one of the structural themes accelerated by the Middle East war, with investors continuing to favor the sector for long-term prospects despite short-term volatility.
The defense sector is experiencing surging export demand, particularly from Eastern Europe and the Middle East, where governments are transitioning from passive defense to active deterrence strategies. According to Bloomberg, T.J. Thornton, head of research marketing at BofA Securities, highlighted that Asian defense producers have shifted from being primarily buyers of weapons to developing expertise and embedding themselves in US and European supply chains. Francis Tan, Asia chief strategist at CA Indosuez Wealth Asset Management, noted that Korean firms stand out for combining competitive pricing, advanced technology, and some of the fastest delivery timelines worldwide.
Despite the recent rally, defense stocks have faced volatility during the Iran war, with Bloomberg's aerospace and defense gauge slipping about 5.5% since the war began as investors took profits and weighed both the war's trajectory and fragile signs of peace. According to Bloomberg, Gary Tan, fund manager at Allspring Global Investments, described the decline at the height of the Iran conflict as "broad portfolio de-risking" rather than a reflection of fundamentals. The subsequent rebound suggests investors are tactically putting risk back on despite potential conflict resolution signs, with the latest US market recovery providing additional momentum for defense sector stocks.
