Bernstein analysts warn that a potential U.S. attack on Iran could create only temporary gains for defense stocks, as geopolitical tensions have historically driven military spending but short-lived conflicts offer limited upside. The S&P Aerospace & Defense Select Industry index has climbed 4% in February and 17% year-to-date amid rising tensions between Washington and Tehran.

A massive military deployment surrounds Iran as the U.S. demands Tehran accept a nuclear agreement, though President Trump has expressed preference for a diplomatic solution. Recent talks in Geneva concluded without a deal, with technical discussions expected in Vienna next week. The Bernstein team, including Douglas Harned and Adrien Rabier, notes that while geopolitical tensions typically boost defense budgets, any upside from a potential strike may prove fleeting.

Analysts point out that last year's U.S. strike on Iranian nuclear infrastructure had no lasting impact on defense stocks. They argue that a U.S. attack is unlikely to lead to extended operations with broad political support, suggesting any stock gains would be short-lived. Instead, they recommend focusing on the Trump administration's proposed $1.5 trillion military budget for 2027, which they believe offers more reliable upside for defense contractors.