Elijah N

Posted on Mar 22 • Originally published at theboard.world

Defense Stocks All-Time Highs: Who's Getting Rich From the Iran War [2026]

#middleeast #defense #security #iran

Defense Stocks Hit All-Time Highs: Who's Getting Rich From the Iran War

On the morning of March 2, 2026 — as news broke of fresh U.S. and Israeli strikes on Iranian nuclear facilities under Operation Epic Fury — the stock market did something that would have seemed obscene to previous generations: the S&P 500 fell, and defense stocks surged.

Northrop Grumman jumped 4.6% in premarket trading. Lockheed Martin rose more than 3%. RTX, the company formerly known as Raytheon, climbed 4.7%. While ordinary Americans were absorbing the news that their country was now in an open shooting war with Iran — a war that burned through $5.6 billion in ammunition in its first 48 hours — a small class of shareholders, executives, and connected politicians were quietly counting their profits.

This is not an accident. It is a system working exactly as designed.

The Numbers Don't Lie

The scale of the defense industry's windfall since the June 2025 strikes on Iran is striking even by the standards of a sector accustomed to conflict-driven growth.

Lockheed Martin (LMT): Up approximately 40% since June 2025, leading year-to-date 2026 gains at +34.72%
Northrop Grumman (NOC): Up approximately 46%, reaching all-time highs above $705 per share — trading in what Wall Street calls "blue sky territory," where there is no historical resistance to slow the climb
RTX Corp (formerly Raytheon): Up 4.7% on the first day of open trading after the Iran strikes, and up 110% over the three years from March 2023 to March 2026 — the largest three-year gain among major defense primes
General Dynamics: Up 57% over the same three-year window
iShares U.S. Aerospace and Defense ETF (ITA): Up roughly 14% in 2026 alone, now managing more than $16 billion in assets — the world's largest aerospace and defense fund
SHLD ETF: Up an extraordinary 90.5% over the past year, gaining 8.1% since late December 2025

For context: the broader market sold off on the day the Iran strikes began. Defense stocks moved in the opposite direction. War is, for these companies, the product launch event of the decade.

The Production Surge: What "Quadrupling" Actually Means

Three days after strikes began, on March 6, 2026, President Trump convened a meeting at the White House with the CEOs of America's largest defense contractors. Defense Secretary Pete Hegseth attended. Also present: Deputy Secretary Steve Feinberg, a private equity billionaire who made his fortune at Cerberus Capital Management — a firm with extensive holdings in defense and government contracting.

The headline from that meeting: Lockheed Martin agreed to quadruple critical munitions production.

The company posted the announcement on X directly: "We have agreed to quadruple critical munitions production. As a result of President Trump's leadership, we began this work months ago with @SecWar Hegseth and Deputy Secretary Feinberg."

The specific production targets are jaw-dropping:

THAAD missile defense systems: Annual output boosted from approximately 96 units to 400 — a more than 4x increase within three years
HIMARS-compatible missiles (PrSM): Projected to increase five times or more by 2030
PAC-3 MSE missiles: Production tripled under a Pentagon-Lockheed agreement announced in January 2026
Tomahawk cruise missiles (RTX): RTX committed to producing more than 1,000 per year, with that announcement coming days before the strikes launched

Lockheed also announced it would raise capital spending from $3.6 billion in 2025 to $5 billion in 2026 — a 38% increase in a single year — and broke ground on a new munitions acceleration center in Arkansas.

RTX, meanwhile, had quietly expanded its Tomahawk production agreements with the Pentagon in the weeks preceding the strikes. The timing, as we will see, has drawn significant scrutiny.

The $1.5 Trillion Vision

The immediate profit surge is only the near-term story. The structural story — the one that will define defense industry valuations for a decade — is the budget trajectory Trump has set in motion.

On January 7, 2026, Trump proposed that the U.S. military budget for fiscal year 2027 should reach $1.5 trillion. His exact words, posted on the White House's official X account: "I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be $1 Trillion Dollars, but rather $1.5 Trillion Dollars."

That number represents a 50% increase over current Pentagon spending. For reference, the entire discretionary budget for non-defense federal programs — housing, education, transportation, environmental protection, scientific research — currently sits around $900 billion. Trump's proposed military budget would exceed it by $600 billion.

The Committee for a Responsible Federal Budget estimates this plan would add trillions to the national debt. Chairmen of both the Senate and House Armed Services Committees have publicly backed the proposal.

Defense industry executives, understandably, have not complained.

NATO: The Global Multiplication Effect

If the American defense spending surge seems extreme, consider that it is only one part of a global rearmament wave that has handed the defense industry its most favorable operating environment in 80 years.

At the 2025 NATO summit in The Hague, all 32 member states (with a single exemption for Spain) committed to raising defense spending to 5% of GDP by 2035. This is not a minor adjustment. It represents a seismic shift in how NATO countries allocate national resources.

The math is staggering. If all NATO allies meet even the 3.5% core spending floor by 2035, total NATO annual military spending would reach approximately $2.9 trillion — an increase of $1.4 trillion over 2024 levels. At the full 5% target, total annual NATO spending would hit roughly $4.2 trillion.

For individual European economies:

Germany: Needs to spend approximately $329 billion in 2035 to reach 5%
France: $221 billion
Italy: $158 billion

This has already ignited a European defense boom. Germany's Rheinmetall — maker of the Leopard tank's ammunition and a major artillery supplier — has been among Europe's best-performing stocks. Italy's Leonardo, which supplies aircraft and naval systems, has seen similar gains. CNBC's reporting from March 12 documents the scale of the European surge in detail, noting that European defense companies are racing to hire engineers, build new factories, and secure long-term government contracts.

Morgan Stanley issued an advisory to clients recommending they "consider increasing exposure around themes like defense, security, aerospace and industrial resilience, where government spending can drive multiyear demand." That advisory went out before the Iran strikes intensified.

Follow the Money: Congress, Cabinets, and Conflicts

The most uncomfortable question about this defense boom is not whether it is happening. It is who knew it was coming, and when they bought in.

The Congressional Trading Problem

Multiple members of Congress hold significant positions in defense stocks while simultaneously sitting on committees that shape military policy and defense budgets. Benzinga documented in March 2026 that when Lockheed Martin and RTX hit all-time highs following the Iran attacks, several sitting members of Congress were shareholders who profited directly.

Michael McCaul, who chairs the House Foreign Affairs Committee — one of the committees with oversight of U.S. foreign policy and military engagement decisions — was among those who added significantly to aerospace holdings in early 2025, months before the Iran conflict escalated. Under current law, members of Congress are required to disclose trades but are not prohibited from trading on information they receive in classified briefings or committee settings. No evidence of illegal insider trading has been established. The structural arrangement, however — lawmakers voting on war authorizations while holding defense stocks — remains exactly as Eisenhower described it sixty-five years ago.

The Cabinet Connection

Pete Hegseth, as Defense Secretary, sits at the top of the procurement chain that decides which contractors receive what contracts. His financial disclosure, filed with ProPublica's Trump Team tracker, reveals the complexity of the revolving door at its current zenith. Steve Feinberg, the Deputy Secretary of Defense, built his fortune at Cerberus Capital — a private equity firm with direct interests in defense and government services. He now co-chairs the body that awards defense contracts.

At the March 6 White House meeting, Feinberg sat across from CEOs whose companies he is now responsible for overseeing and whose contracts he helps approve. Lockheed's announcement specifically named both Hegseth and Feinberg as the officials with whom they had been working on production expansion "for months" — meaning those discussions predated the public announcement of the Iran strikes.

Trump himself addressed defense contractor CEOs directly at the meeting — lambasting some for excessive executive pay and stock buybacks while simultaneously demanding they accelerate production. The tension was palpable and revealing: the government wants faster production without reducing profit margins, while contractors want maximum government spending with minimal accountability.

The Pentagon, under Hegseth's leadership, spent more than $93 billion in contracts and grants in September 2025 alone — the highest single-month total since at least 2008.

The Critique: Buybacks Over Bullets

The most pointed criticism of the defense industry's conduct comes from a data point that Jacobin surfaced in March 2026: between 2020 and 2025, America's top defense contractors spent $110 billion on stock buybacks and dividends — more than double what they spent on actual capital expenditures to expand production capacity.

Read that again. These companies, funded overwhelmingly by taxpayer dollars, chose to return more than twice as much money to wealthy shareholders as they invested in the factories, tooling, and workforce that would actually produce weapons.

This is now creating a supply crisis in the middle of an active war. A report from ainvest.com noted that defense contractors are facing a $2 billion per day headwind as the war's consumption rate exceeds their ability to produce. The $5.6 billion burned in the first 48 hours wasn't replenished in 48 hours — it can't be. Production lines that were idled or run at minimum capacity for a decade cannot be quadrupled overnight, regardless of what a CEO promises at a White House meeting.

Responsible Statecraft, the foreign policy think tank, documented the stock price surge extensively and raised the question that mainstream financial media has been reluctant to ask directly: the same companies that spent a decade enriching shareholders rather than building production capacity are now being handed emergency contracts to build the capacity they should have maintained all along — and will be paid premium rates to do it.

Eisenhower's Ghost

On January 17, 1961, President Dwight Eisenhower delivered his farewell address to the American people. Eisenhower was a five-star general, the supreme commander of Allied forces in Europe during World War II, and a two-term Republican president. He knew the defense industry from the inside.

His warning was specific and unambiguous: "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."

Sixty-five years later, his language reads less like a warning and more like a description of current events. The "unwarranted influence" he feared is now institutional. Defense contractors occupy seats in the cabinet (Feinberg), sit in the advisory networks that shape policy (think tanks funded by Raytheon and Lockheed), and collect direct financial returns from the members of Congress who vote on their contracts (via campaign contributions and through stock ownership).

What Eisenhower could not have fully anticipated was the inversion that has since occurred: the complex no longer merely influences policy. In key respects, it is policy. The $1.5 trillion budget target was not proposed by the Pentagon based on strategic analysis. It was announced by a president with no military background, on social media, in a post that read like an advertisement for an industry that has donated heavily to his political allies.

The WWII Argument: Is Defense Spending Actually Good?

There is a contrarian case that deserves honest engagement. World War II defense spending pulled the United States out of the Great Depression, right?

The historical record is more complicated than the popular myth suggests. During WWII, defense spending rose from 1.4% of GDP in 1940 to over 37% in 1945, and unemployment did fall below 2%. But Robert Barro's economic analysis estimates the WWII fiscal multiplier at approximately 0.6 — meaning each dollar of military spending generated roughly 60 cents of economic output. That is a money-losing proposition in economic terms, even if strategically necessary.

More importantly, the WWII analogy fails on a critical structural point: in 1941, the United States had idle industrial capacity on a massive scale, millions of unemployed workers, and an economy operating far below potential. Military spending could mobilize genuinely underutilized resources.

In 2026, the U.S. economy is not operating with idle capacity. It is operating in a tight labor market with near-full employment. Defense spending growth does not mobilize unemployed workers — it competes for employed ones. Every engineer hired by Lockheed to build THAAD systems is an engineer not building semiconductor fabs, EV infrastructure, or medical devices. Every CNC machinist retooled for HIMARS production is a machinist not available for civilian manufacturing.

The opportunity cost of a $1.5 trillion military budget is not abstract. The U.S. currently spends approximately $900 billion on all non-defense discretionary programs combined — education, housing, transportation, medical research, scientific grants, environmental protection. Trump's defense budget would exceed that sum by 67%. The political economy of that trade-off is not being debated in any serious public forum.

The economic research on modern defense spending is, if anything, more pessimistic than the WWII analogy suggests. Studies cited by the War Prevention Initiative find substantial evidence of a direct link between increased military spending and decreased long-term economic growth. Federal war spending since 2001 resulted in an estimated loss of between one and three million civilian employment opportunities.

The Innovation Question

There is a second-order effect that almost no mainstream analysis is tracking: the defense boom may be quietly strangling the next generation of American civilian technological innovation.

The United States has approximately 4 million working engineers and technical specialists. The defense sector is now competing — at elevated government pay rates, with long-term contract stability — for a pool of talent that also builds the products, platforms, and infrastructure of the civilian economy. Lockheed is spending $5 billion on capital investment in 2026. That capital competes with venture-backed startups, semiconductor fabs, clean energy projects, and biotech research for the same engineers, the same fabrication facilities, and the same supply chains.

The historical parallel is instructive. The Soviet Union ran a permanent war economy for decades. It produced extraordinary military hardware — world-class missiles, tanks, submarines. It also presided over the collapse of civilian innovation, consumer goods quality, and economic efficiency that ultimately made it impossible to sustain. The United States is not the Soviet Union, but the lesson that permanent militarization crowds out civilian dynamism is not a partisan talking point. It is an empirical pattern.

DARPA has long been the counterargument — defense spending produced the internet, GPS, and advanced materials. But DARPA's model is precisely the opposite of the current one: small, high-risk, basic research grants rather than trillion-dollar production contracts to incumbent giants. Paying Lockheed $5 billion to make more of the same missiles it has been making for thirty years is not DARPA. It is the military-industrial complex doing what it was always designed to do: extract rent from a permanent emergency.

Who Is Not Getting Rich

It is worth naming who is on the other side of this ledger.

The U.S. national debt will absorb the cost of a $1.5 trillion military budget. Future taxpayers — including the young Americans who may eventually serve in the wars these weapons enable — will service that debt. Social Security and Medicare face financing gaps that could be addressed with a fraction of the proposed defense increase. The housing shortage, the crumbling bridge inventory, the underfunded public research universities, the health systems in rural counties without hospitals: none of these will see their budgets doubled.

In Iran, the civilian cost of the conflict is being tallied by organizations that have less access to financial markets. The $5.6 billion in ammunition burned in 48 hours did not disappear into empty desert. It landed somewhere.

And among American workers who do not own significant stock portfolios — which is most Americans — the defense boom offers wages and jobs in exchange for foregoing investment in the social infrastructure that more directly improves civilian life expectancy, educational attainment, and economic mobility.

The stock charts for Lockheed and Northrop tell one story. They are real. The companies are genuinely valuable, the contracts genuinely large, the profits genuinely flowing. But they are not the whole story, and in the current media environment, they are the only story most financial coverage is telling.

Related Analysis

FAQ

Q: Which defense stocks have gained the most from the Iran war?

RTX (formerly Raytheon) has shown the strongest three-year performance, up approximately 110% from March 2023 to March 2026. In the immediate period since June 2025 strikes on Iran, Northrop Grumman leads with approximately +46%, followed by Lockheed Martin at approximately +40%. For ETF exposure, SHLD has rallied 90.5% over the past year. The iShares Aerospace and Defense ETF (ITA) is up roughly 14% in 2026 year-to-date.

Q: Is it legal for members of Congress to own and trade defense stocks?

Yes, currently. Members of Congress are required under the STOCK Act to disclose trades within 45 days of execution, but they are not prohibited from owning or trading stocks in industries they regulate or on which they vote. No law prevents a member of the House Armed Services Committee from holding Lockheed Martin stock and voting to approve Lockheed's contracts. Multiple reform proposals have failed to advance. The structural conflict of interest is legal, disclosed, and ongoing.

Q: How much ammunition has the U.S. burned in the Iran conflict, and what does that mean for production?

The U.S. burned through an estimated $5.6 billion in ammunition in the first 48 hours of the Iran conflict. That consumption rate exposes a critical gap: defense contractors spent the previous five years returning $110 billion to shareholders via buybacks and dividends rather than investing proportionally in production capacity. The result is a supply chain that cannot immediately replace what is being used, despite executive pledges to "quadruple" production. Tripling or quadrupling output requires new factories, retooled supply chains, and a trained workforce — all of which take years, not months.

Q: What is the NATO 5% GDP pledge, and what does it mean for European defense companies?

At the 2025 Hague Summit, all 32 NATO members except Spain pledged to raise defense spending to 5% of GDP by 2035. Meeting the 3.5% core floor alone would require $1.4 trillion in additional annual NATO spending versus 2024 levels. This has ignited a European defense boom benefiting companies like Germany's Rheinmetall and Italy's Leonardo, which are expanding production capacity, hiring engineers, and securing decade-long government contracts. Morgan Stanley has advised clients to increase defense sector exposure specifically because of this structural government demand driver.

Q: What was Eisenhower's warning about the military-industrial complex, and does it apply today?

In his 1961 farewell address, President Eisenhower — himself a five-star general and supreme Allied commander in WWII — warned against the "unwarranted influence" of the military-industrial complex, which he defined as the alliance between defense contractors and the military establishment. He warned specifically that this complex could distort democratic governance, economic priorities, and individual liberties. In 2026, the complex he described has deepened considerably: defense executives occupy senior cabinet positions, Congress members hold defense stocks while voting on defense budgets, and a $1.5 trillion military spending proposal is being treated as politically mainstream despite representing a historically unprecedented peacetime allocation. The warning was not hypothetical. It was a description of a trajectory he could already see.

For continued coverage of the economic consequences of the Iran conflict, see our related analysis on oil market disruptions and Strait of Hormuz shipping impacts.

Originally published on The Board World

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