The US-Israel conflict continues to escalate! Defense stocks are collectively strong. The latest favored stocks among investors seeking funding (list)

The military concept performed strongly in the morning trading session on March 2, with leading gains in aerospace equipment, ground weaponry, military electronics, aviation equipment, and maritime equipment. Among them, Zhongtian Rocket, Guanshang Technology, Huaru Technology, Leike Defense hit the daily limit; Zhongwu Drone, Chengdian Optoelectronics, Fujijui, Aerospace Nanhuh, Jieqiang Equipment, Northern Long Dragon surged over 10%.

U.S.-Israel-Iran Conflict Continues to Escalate

On the news front, the situation in the Middle East has sharply deteriorated. According to reports from Xinhua News Agency and other media, the U.S. and Israel launched attacks on Iran on February 28. Iran retaliated against multiple military bases in the Middle East, affecting countries such as Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, and Jordan. Iran’s Supreme Leader Khamenei was killed in the attack.

Currently, the conflict between the U.S., Israel, and Iran continues, with risks of further escalation. On March 2, CCTV News reported that leaders of the UK, France, and Germany issued a joint statement on March 1, indicating possible “necessary defensive actions” against Iran. Meanwhile, a strong explosion was reported at the Akrotiri UK Air Force Base in southern Cyprus on March 1 local time.

According to CCTV International News, in the early hours of March 2 local time, alarms sounded in several northern regions of Israel. The Israeli military spokesperson said a rocket launched from Lebanon was intercepted. Hezbollah in Lebanon then issued a statement claiming to have fired rockets at Israel. Currently, Israeli forces are bombing the southern suburbs of Beirut, Lebanon, with explosions reported.

Geopolitical Conflicts Drive Increased Military Trade

China Galaxy Securities stated that the current international division and confrontation are intensifying, with global geopolitical instability rising significantly. It is expected that this trend may continue during the 14th Five-Year Plan period, leading to a substantial increase in military procurement demands in relevant regional countries. For less developed countries, Chinese and Russian equipment offer high cost-performance ratios and are preferred choices. However, Russia is still involved in regional conflicts, and restructuring its military-industrial chain takes time. China’s international standing has been rising in recent years, with high autonomy and a complete supply chain, potentially filling some of the new demand gaps.

Orient Securities also noted that the tense situation in the Middle East is likely to accelerate overall military expenditure and military trade imports in the region. Additionally, the shift from reliance on a single source to diversified supply sources has become a core security demand for Middle Eastern countries. China’s share in military trade is expected to increase, with rising demand for high-end, defensive, and cost-effective conventional weapons.

Market Potential Exceeds 100 Billion Yuan?

China Galaxy Securities cited data from the Russian International Arms Trade Analysis Center (CAWAT), estimating that the global military trade market will reach $111.6 billion in 2024, a year-over-year increase of 15.2%. The U.S. and China account for $42.33 billion and $3.22 billion respectively (about 22 billion RMB), representing 37.9% and 2.9%. As Chinese equipment gains international reputation (with the India-Pakistan conflict in 2025 highlighting Chinese gear), and based on current growth trends and geopolitical changes, China Galaxy Securities projects that over the next 5-10 years, China’s global market share could rise to 10-15%, with a potential market space of approximately 100-150 billion RMB, offering broad prospects.

Industry Reversal of Prosperity?

The military industry sector itself is also trending positively. Founder Securities stated that the industry’s prosperity reversal trend has been established. 2025, as the final year of the 14th Five-Year Plan, is also a turning point for the industry’s cycle, with fundamentals bottoming out and rebounding. Excluding the shipping sector, the industry’s overall revenue and profits in the first three quarters of 2025 showed a year-over-year halt in decline and a clear improvement quarter by quarter, confirming a trend of industry recovery. Leading indicators also suggest a new wave of growth: downstream main engine manufacturers’ prepayments and contract liabilities increased significantly year-over-year, indicating accelerated order placement; upstream and midstream inventory growth accelerated, providing sufficient momentum for performance conversion.

According to Founder Securities, in the first three quarters of 2025, core defense and military industry targets achieved revenue of 538.29 billion yuan, up 6.35% year-over-year; net profit attributable to parent was 29.61 billion yuan, down 4.55%, with the decline narrowing significantly. Excluding shipping, quarterly revenue and profit growth turned positive, with noticeable improvement each quarter. In Q3 2025 (excluding shipping targets), revenue increased by 28.57% year-over-year—the best since 2023; net profit attributable to parent in that quarter was positive for the first time in nearly seven quarters.

Source: Founder Securities

Top 20 Net Buyers of Financing in 2026

Focusing on individual stocks, many military stocks have been heavily bought by leveraged funds since 2026. Notably, the newly listed company Dianke Lantian received a net financing purchase of 901 million yuan this year. AVIC Optoelectronics followed with 745 million yuan. Triangle Defense, Feliwa, China Shipbuilding, and others also saw net financing inflows exceeding 500 million yuan.

Among these leveraged stocks, Triangle Defense, Hailanxin, Hangfa Control, Guobo Electronics, and Taihao Technology have surged over 30% since 2026.

China Galaxy Securities indicated that in 2026, focus will be on the upstream of the military-industrial chain, military trade, the “Two Aircrafts” (fighter jets and bombers), and equipment intelligence opportunities. In the short term, 2026, as the first year of the 14th Five-Year Plan, is expected to trigger a new round of inventory buildup at the main engine end, with upstream industries benefiting first, with orders likely to start accelerating by late 2025. In the medium term, major turning points in military trade demand will drive a simultaneous increase in both volume and price of total equipment demand, benefiting main engine and key subsystem manufacturers. AI’s strong demand on power generation is expected to boost the gas turbine industry chain. Long-term, focusing on the 100th anniversary of the military’s founding in 2027, defense spending is expected to maintain a high growth rate of around 7%, with accelerated iteration of new main combat equipment and rising demand for new combat capabilities, sustaining industry prosperity.

(Source: Oriental Wealth Research Center)