As the Middle East war, sparked by U.S. and Israeli airstrikes on Iran, drags on, countries are rapidly depleting their weapon stockpiles, and the defense industry is expected to reap another major windfall.
On the 2nd (local time), the Financial Times (FT) in Britain reported, "The Ukraine war pushed many defense companies' order backlogs and sales to record highs, and the Middle East conflict will bring another influx of funds into this institutional sector as the United States and its allies rush to replenish their weapon reserves."
With the Middle East war continuing for more than a month, the warring parties' weapon inventories are rapidly running dry. According to the Royal United Services Institute (RUSI), in the first 16 days of the war the United States, together with coalition partners, expended more than 11,200 munitions worth about $26 billion. That includes more than 1,200 Patriot missile defense system interceptors from RTX (Raytheon Technologies), hundreds of long-range Tomahawk missiles, and roughly 300 Terminal High Altitude Area Defense (THAAD) interceptors from Lockheed Martin.
Tom Karako, director of the Missile Defense Project at the Center for Strategic and International Studies (CSIS), said, "The number of offensive and defensive missiles being consumed in current operations is, frankly, frightening," adding, "This is all the more concerning because these assets are needed to deter conflict and adventurism in the Pacific region." Here, "conflict and adventurism in the Pacific" refers to China's potential threat over Taiwan.
As weapons are quickly exhausted, the United States is moving to expand defense expenditure. The Donald Trump administration is preparing a $1.5 trillion (about 2,300 trillion won) defense budget proposal for next year to submit to Congress, and the Ministry of National Defense has asked the White House to request an additional $200 billion (about 300 trillion won) to fund the war with Iran. Defense Secretary Pete Hegseth said on the 19th of last month, "It costs money to take out the bad guys."
Gulf countries that must respond to Iran's retaliatory attacks are also seeing a surge in weapons demand. Earlier, on the 19th of last month, the U.S. Ministry of National Defense approved a plan to sell a total of $16.5 billion (about 25 trillion won) in weapons to three countries: the United Arab Emirates (UAE), Kuwait, and Jordan. FT said major global defense companies such as RTX, Lockheed Martin, and Northrop Grumman are expected to be the biggest beneficiaries of this policy.
The war's benefits are spreading not only to large defense companies but also to small and midsize firms. A single Patriot missile costs more than $3 million (about 4.6 billion won) and takes months to produce, prompting governments to seek cheaper alternatives. In this war, Korea's LIG Nex1 drew attention with a midrange air-defense system that is less expensive than RTX's Patriot, and the Cheongung-II (M-SAM II) has already been exported to Saudi Arabia, Iraq, and the UAE.
Among startups, SpektreWorks of Scottsdale, Arizona, which developed the low-cost unmanned combat attack system (LUCAS) drone, is cited as a leading beneficiary. The company's drone was developed to counter Iran's Shahed drones and has been deployed to the Middle East by the U.S. Ministry of National Defense since the war broke out. In addition, drone companies such as AeroVironment and Unusual Machines are also seen as benefiting.
Rising weapons demand is drawing investment capital into the global defense industry. Venture capital is flowing to firms such as Titan Technologies in Munich, Germany; Cambridge Aerospace in the United Kingdom; Origin Robotics in Latvia; and Frankenburk Technologies in Estonia. In particular, Israeli defense company Elbit Systems, buoyed by massive inflows, rose to No. 1 by market capitalization on the Tel Aviv Stock Exchange in the middle of last month.
The defense boom is expected to continue for the time being. Several European startups recently told FT that Middle Eastern countries have reached out to secure weapon supplies. Soren Monroe-Anderson, CEO of the Los Angeles (LA)-based startup Nearoast, said, "After the U.S. and Israeli airstrikes on Iran, the Ministry of National Defense's 'demand signal' increased sharply."