Over the weekend, the U.S. and Israel attacked Iran, killing its leader, Ayatollah Ali Khamenei, and adding a new layer of uncertainty to global markets.
Oil prices spiked on the news as Iran is a major exporter of oil and controls the Strait of Hormuz, a key oil shipping channel. U.S. stocks were down initially on the news, but recouped most of their losses by late morning. Gold spiked as it's seen as a safe haven asset, and defense stocks rose as well, as is typical when war breaks out.
Two of the biggest winners were a pair of drone stocks, as drones are being used on both sides of the war. Those were Ondas Holdings (ONDS +5.24%), which was up 10% and Elbit Systems (ESLT 1.66%), which had gained 7% as of noon Monday.
Let's take a look at what each stock has to offer to see if they are buys.
Image source: Getty Images.
1. Ondas Holdings
It's unclear which companies were involved in the strike on Iran, but Ondas is believed to be among them.
Ondas is best known as a defense tech company that provides technological architecture for autonomous defense. It developed Optimus, the first FAA-certified small drone for fully automated aerial defense operations, and it provides other unmanned aerial systems and countersystems for fighting hostile drones.
Ondas is still a small company with revenue of $10.1 million in the third quarter, which was up 6-fold from the quarter a year ago and 60% on a sequential basis, and it's targeting at least $110 million in revenue in 2026.
NASDAQ: ONDS
Key Data Points
In addition to the impact of the strike in Iran, Ondas this morning announced a $10 million strategic investment in World View, a defense company focused on stratospheric ISR (intelligence, surveillance, and reconnaissance).
Ondas stock has soared over the last year, up 1,000%. At a market cap of $5 billion, the stock trades at a sky-high valuation, but there's more room for growth if it can deliver on its forecast for 2026. We may not know for sure if Ondas was involved in the Iran strike, but we will get an update from the company next week when it reports earnings on March 12.
2. Elbit Systems
Elbit Systems (ESLT 1.66%) is an Israeli defense company that is the primary drone supplier for the Israeli Defense Forces (IDF), providing about 85% of its drone fleet. Like Ondas, it also develops defense shield technologies, such as intercepting anti-tank missiles.
Elbit's growth was modest in the third quarter, rising 12% to $1.92 billion, but that could be due to the winding down of the war in Gaza as a ceasefire was signed shortly after the quarter ended. The company noted that it had experienced a "material increase in the demand for its products and solutions" since the beginning of the war, and a sustained conflict in Iran could do the same thing.
NASDAQ: ESLT
Key Data Points
There were other promising growth signs in the quarter as well, including that its order backlog increased to $25.2 billion, equivalent to more than three years of run rate revenue based on the most recent quarter.
According to The Jerusalem Post, drones are a key component of Israel's air defense strategy. Elbit's Hermes 900 drone is likely being used for surveillance as it can remain airborne for long periods of time.
The defense stock has also been a strong performer on the stock market, up more than 150% over the last year, and the ongoing conflict in the Middle East and large backlog should support its continued growth.
Elbit is priced at a premium with a price-to-earnings ratio of around 80, but that seems reasonable given its position as a leading Israeli defence supplier, large backlog, and growth potential, especially with a new regional conflict breaking out.
