In 2022, Indian Prime Minister Narendra Modi famously told his Russian counterpart Vladimir Putin that it “is not an era of war.” With the benefit of hindsight, the reverse only seems to be happening, and even India had a brief but significant armed conflict with archrival and neighbor Pakistan last year. The Russia-Ukraine war, or the “special military operation,” as Putin likes to call it, has dragged on for four years, while the Middle East is on the boil again after Iran’s supreme leader, Ali Hosseini Khamenei, was killed in joint strikes by the U.S. and Israel over the weekend. There have been “mini war zones” globally, and President Trump has naturally taken dubious credit for ending many of these wars, including between Armenia and Azerbaijan and also Thailand and Cambodia.
We can be reasonably sure that geopolitical tensions will stay elevated for the near foreseeable future. Given that backdrop, I find Lockheed Martin (LMT) and Agnico Eagle Mines (AEM) as two stocks that can benefit from the elevated geopolitical tensions.
Lockheed Martin Is an Ultimate War Stock
Global defense spending is expected to rise significantly over the next decade, and last year, NATO members (except Spain) committed to investing 5% of their respective GDPs in defense over the next 10 years. While nine NATO members did not meet the 2% target that the alliance set in 2014, there could be a sense of urgency now, given the rising threat from Russia and the growing acknowledgement among member states of the hitherto pacifist region that it cannot outsource security to the U.S., at least not entirely.
U.S. partners in the Middle East are also ramping up defense spending. India, the world’s biggest arms importer, has also increased spending, as I had previously predicted. While the bulk might still not come to U.S. companies, it might need to increase purchases from the U.S. to meet the massive (and most likely impossible) $500 billion import commitment as part of the trade deal.
Lockheed shares are up sharply since I covered the stock last July and still have a dividend yield of over 2%. Its valuation multiples have expanded amid the rally, and the stock trades at a forward price-to-earnings (P/E) multiple of just over 22x, which is above its historical average. However, given the era we are living in, defense stocks have seen a rerating, and the valuation premium looks here to stay.
The average sell-side analyst is not on the same page, though, and LMT trades above its mean target price of $640.28 even as it has a consensus rating of “Moderate Buy” from the 23 analysts polled by Barchart.
Agnico Eagle Mines Stock Could Gain as War Fears Lift Gold Prices
Gold has been the ultimate “Trump trade,” as I have noted multiple times. While the yellow metal came off its record high, it is soaring again as war fears rise. Apart from higher geopolitical tensions, the de-dollarization drive of central banks globally is also supportive of gold prices.
The massive increase in U.S. debt and the unsustainable fiscal deficit cost the world’s biggest economy its only top credit rating last year, and gold is now seen by many as the preeminent safe haven asset. While gold prices might come under pressure once tensions in the Middle East ease, the precious metal’s long-term outlook looks quite rosy, especially as cryptocurrencies have lost their sheen and have been under pressure.
Higher gold prices have meant that gold mining companies’ coffers are literally overflowing with cash. AEM, for instance, had a net debt of $217 million at the beginning of 2025 and ended the year with a net cash of $2.67 billion, which basically means that it holds much more cash than the debt it owes.
Like Lockheed Martin, AEM has a consensus rating of “Moderate Buy” and has run ahead of its mean target price of $245.41. However, that’s because of the over 48% rise this year and lagging analyst action.
Overall, gold and defense stocks are two themes that are a play on the unending wars the world has seen over the last few years. Stories like artificial intelligence (AI) get outsized attention, but gold and defense stocks, particularly the former, have delivered stellar returns for investors over the last two years, and while there could be intermittent pullbacks, the theme looks promising to me for the medium term.
