By Purvi Agarwal, Rashika Singh and Johann M Cherian

April 1 (Reuters) – U.S. defense stocks have declined even as the Iran war drags on, indicating that the typical “buy-on-conflict” trade had largely peaked in the weeks before in anticipation of tougher action by President Donald ‌Trump.

The NYSE Arca Defense index, which includes 34 small and large-cap U.S. companies, fell nearly 8% in March, compared with the broader S&P ‌500’s 5% drop. In contrast, it had gained about 12% in February 2022, when Russia invaded Ukraine.

The sluggish performance, strategists said, signaled investors were unwinding positions after a strong run this year ​and does not reflect fading demand or doubts about longer-term defense spending.

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