The U.S. and its allies are rushing to replenish depleted arsenals in response to the Iran conflict, creating a potential windfall for global defence contractors. Many firms, having already seen record revenues from the Ukraine war, now face another surge in orders as Washington prepares to request $1.5 trillion in defence spending for the next fiscal year. The Pentagon has additionally requested an extra $200 billion to fund operations related to the Iran conflict, signaling the scale of anticipated demand.
Early operations have already exhausted massive quantities of weaponry. In the first 16 days of the campaign, U.S. and coalition forces fired more than 11,200 munitions, estimated to cost $26 billion, including over 1,200 RTX Patriot missile-defense systems, hundreds of long-range Tomahawk missiles, and more than 300 Lockheed-built Thaad interceptors. “The number of offensive and defensive missiles that are being expended in the current operation is, frankly, scary,” said Tom Karako, director of the Missile Defense Project at the Center for Strategic and International Studies, citing concerns over stockpiles needed to deter threats in the Pacific, including China.
The biggest beneficiaries of increased U.S. spending are expected to be established defence giants such as RTX, Lockheed Martin, and Northrop Grumman. Boeing, which produces sensors for Lockheed’s Patriot Pac-3 surface-to-air missiles, will triple production under a new seven-year framework agreement. Foreign military sales to Gulf states since the start of the conflict, totaling $16.5 billion, have also favored these companies.
Yet established contractors are not the only ones in line to profit. Governments facing high costs for missiles are increasingly seeking low-cost alternatives. South Korea’s LIG Nex1, for example, has seen demand surge for its mid-range Cheongung-II (M-SAM II) system, sold to Saudi Arabia, Iraq, and the UAE. Shares in the company jumped more than 40 percent at the start of the Iran war, reflecting investor confidence in cheaper air-defense solutions.
Israel’s Elbit Systems has similarly benefited, becoming the highest-valued company on the Tel Aviv Stock Exchange after securing new contracts to deliver 155mm ammunition shells following an increase in Israeli defence spending. U.S. start-ups, including SpektreWorks, AeroVironment, and Unusual Machines, are also racing to supply counter-drone systems, Low-Cost Uncrewed Combat Attack System (Lucas) drones, and AI-guided interceptors. Venture capital has flowed into dozens of European and U.S. developers, including Munich’s Tytan Technologies, Cambridge Aerospace, Latvia’s Origin Robotics, and Estonia’s Frankenburg Technologies.
The Pentagon and U.S. Air Force are also investing in innovative, low-cost alternatives to traditional munitions, such as the “Franklin” cruise missile project and AI-enabled drones, to meet urgent operational requirements. Companies like Neros in Los Angeles are reprioritizing deliveries to respond to the heightened demand for rapid deployment of combat systems.
Despite the influx of orders and government interest, production bottlenecks remain a concern, particularly among smaller suppliers critical to components like rocket motors, fasteners, and missile nozzles. Analysts note that long-term contracts are essential for defence firms to scale production efficiently, yet many agreements currently remain framework-level commitments without guaranteed funding. “A lot of the bottlenecks aren’t at the five or biggest companies, but at the sub-tier of suppliers of which there may only be two or three in the country producing a particular component,” said Stacie Pettyjohn, director of the defence program at the Center for New American Security.
For investors and contractors alike, the Iran conflict underscores both opportunity and risk. Traditional munitions are in high demand, but cost-effective alternatives, counter-drone technology, and AI-enabled systems are emerging as essential components of modern warfare. Firms capable of delivering speed, affordability, and innovation are likely to capture the largest share of Pentagon spending, while bottlenecks in the supply chain could slow production and delivery of critical systems.
As governments in the Middle East and beyond scramble to replenish stockpiles, the defence sector faces a surge of orders that could reshape both revenue forecasts and strategic priorities. From major U.S. primes to nimble start-ups, companies are racing to meet the urgent operational needs of war while navigating supply constraints, regulatory hurdles, and investor expectations in a market where speed and technological sophistication can determine who profits from global conflict.
