Lockheed Martin Stock: Is The Iran War Already Priced In?

Lockheed Martin (LMT) stock hit an all-time closing high of $676.70 on March 2, pulled back to around $610, and recovered to trade near $624 by late March. Up roughly 40% over the past year, a move of this scale in a defense major demands a hard question: is it justified by fundamentals, or has the Iran war premium run its course?

The answer depends almost entirely on one variable: the duration of the Strait of Hormuz disruption.

To accurately price the upside of that geopolitical catalyst, we must first isolate the war premium from LMT’s underlying fundamentals.

Image by John atlantis1@outlook.be from Pixabay

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What the Backlog Actually Tells You

Before touching geopolitics, LMT’s base case is exceptionally strong. The company ended 2025 with a record $194 billion backlog, roughly 2.5x its annual revenue. This is contracted, government-obligated revenue.

The structural driver is the new 7-year framework contract architecture. Moving away from inefficient annual awards, this new model enables long-term investment and rapid production scaling:

• THAAD Interceptors: Production will increase from 96 to approximately 400 units annually (a 317% capacity jump).
• PAC-3 MSE Interceptors: Production will accelerate from roughly 600 to 2,000 units annually (a 233% expansion).

These are contractually committed agreements, not speculative scenarios indicating that Lockheed’s 2026 EPS growth guidance is likely reliable.

What the Iran War Does, and Doesn’t, Add

Does the war add demand? Absolutely. Back in June 2025, during the first leg of the Iran conflict, over 150 THAAD interceptors were expended in the first 12 days of the conflict, depleting an estimated 25% of the U.S. inventory. Stockpile depletion at this velocity creates structural replenishment demand that exists independently of a ceasefire.

Furthermore, the Pentagon’s $200 billion supplemental request to fund the Iran conflict is purely additive, sitting on top of the already-authorized FY2026 defense budget.

Has the war premium been priced in? Largely, yes, but conditionally. The 40% run reflects both the structural backlog and a geopolitical premium for active conflict. The question is whether that premium has peaked.

The Hormuz Variable: Why $700 Isn’t Priced In Yet

The Strait of Hormuz closure is the single most consequential variable for LMT re-rating past $700. With Brent crude peaking at $120 per barrel, this energy supply shock doesn’t just rival the 1970s, it exceeds it as the largest oil disruption in history, according to EIA. Consequently, where oil goes from here matters enormously for how long this economic pressure lasts. For our near-term outlook, see our separate analysis: Where Will Oil Prices Be on March 31?

Meanwhile, ExxonMobil (XOM) shares rose approximately 33% year-to-date to all-time highs above $160, rewarded for its Permian Basin exposure which is now viewed as “safe-haven” barrels immune to Persian Gulf instability. The fact that even ExxonMobil is being re-rated by the same crisis illustrates how broadly the Hormuz disruption is repricing risk across asset classes and why defense budgets remain politically untouchable in this environment even if broader equities face headwinds.

This matters for LMT for two reasons:

• Extended Defense Justification: Damaged regional facilities and shut-in production mean an elevated risk premium might be here to stay. A protracted disruption structurally justifies heightened allied missile defense spending well beyond the immediate conflict.
• Stagflationary Insulation: If the disruption persists, global real GDP growth could see a correction. S&P Global recently cut their GDP forecasts for several markets. While a stagflationary macro backdrop is a headwind for broader equities, defense contractors with locked-in government revenue are fundamentally insulated from commercial demand destruction.

The catalyst for $700+ is a prolonged Hormuz closure that forces Congress to rapidly rubber-stamp the $200 billion supplemental. As Secretary of War Hegseth previously noted, there is no “timeframe” for ending the conflict, meaning an open-ended depletion cycle for Lockheed’s order book.

The Bear Case: Supply Is the Ceiling, Not Valuation

The most credible argument against the $700+ thesis isn’t overvaluation; it’s operational constraint. Can Lockheed capture this incremental demand fast enough?

The company’s filings acknowledge that supply chain friction and performance issues have delayed deliveries and capped production ramps. Scaling THAAD production from 96 to 400 units annually requires years of infrastructure build-out. While the new Munitions Acceleration Center in Camden, Arkansas, is a massive step forward, facilities of that scale take time to come online.

The war demand is real, but the constraint is conversion speed. Can Lockheed turn demand into revenue fast enough to beat the EPS growth trajectory already baked into its current price? Consensus reflects this hesitation: with a median price target around $660, analysts see limited incremental upside unless production timelines accelerate or the supplemental budget drops immediately.

The Verdict

The Iran war premium is partially priced in, but a re-rating to $700+ is contingent, not inevitable.

• What’s Priced In: The $194B structural backlog, 7-year framework contracts, the 37% EPS growth trajectory, and a moderate geopolitical premium. This justifies LMT’s current trading range.
• What’s Not Priced In: A prolonged Hormuz disruption forcing rapid passage of the $200 billion supplemental, faster-than-expected PAC-3/THAAD production ramps, or a NATO-level procurement wave triggered by demonstrated IRGC capabilities.

For existing shareholders, the risk-reward remains favorable. The downside is heavily insulated by a massive backlog. However, unlocking $700+ requires a positive production capacity surprise or an escalation that accelerates Congressional procurement dollars. That makes LMT as much a bet on political execution as it is on its balance sheet.

A peer comparison highlights this dynamic. While Lockheed trades at a conservative 21x forward earnings, Northrop Grumman (NOC)  commands a 25x forward multiple at around $700, blowing past consensus targets on the back of 9.6% Q4 revenue growth and a record $95.7 billion backlog.

This spread is telling: investors are currently willing to pay a premium for NOC’s stronger price momentum and growth trajectory, despite LMT’s “safe haven” status. However, if Lockheed accelerates its production ramp and captures a significant share of the $200 billion supplemental, a market re-rating of LMT’s forward multiple toward NOC’s 25x provides a highly credible path to a $700+ stock price.

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