By Al Root
The U.S., Israel, and Iran are using up a lot of munitions fighting what appears to be a one-sided battle. Those will have to be replenished, a potential boon to defense contractors -- and possibly the overall economy.
The war with Iran, which started on Feb. 28, has featured thousands of military assets, including drones, missiles, interceptors, manned fighter jets, refueling planes, naval fleets, and scores of intelligence and reconnaissance tools.
It's straining the supply chain, with some concern about the availability of missiles and interceptors. President Donald Trump moved to allay those concerns on Friday, meeting with defense industry executives.
Contractors, including BAE Systems, Boeing, Honeywell, L3Harris Technologies, Lockheed Martin, Northrop Grumman, and RTX, "have agreed to quadruple production of exquisite class weaponry...production of many of these weapons is already underway," the president said. That group covers a lot of missiles and missile parts.
Adequate supply for the troops is good news, but it all adds up. The conflict is costing the U.S. almost $1 billion a day, according to the Center for Strategic and International Studies, a Washington, D.C.-based bipartisan think tank. Daily figures will change, but it's easy to see the current conflict stretching into the tens of billions.
Investors can probably double any cost to account for replenishment and maintenance. A $100 billion total bill for the current Iran conflict would represent roughly a 10% increase in 2026 defense spending, with much of that going to U.S. defense contractors, the largest of which generated about $280 billion in combined sales in 2025.
A one-time bump is nice, but any Iran-related increases are just the latest example of current trends. President Trump has suggested spending $1.5 trillion annually on national defense and is cutting deals with companies to dramatically increase weapons production. European nations are poised to double their defense spending -- and then some -- within a decade, taking the total for the region as high as $1 trillion, up from an estimated $440 billion in 2025.
It adds up to a Western world defense sector that could be 50% bigger by the end of the decade. That's great for defense stocks and for U.S. manufacturing at large. Currently, there are almost 13 million manufacturing workers in the U.S., down from a peak of almost 20 million in the 1980s. Total employment in the American aerospace and defense industry is about 2.2 million, according to the Aerospace Industries Association.
In theory, and optimistically, outsized growth in aerospace and defense could add as many as one million jobs and even up to one percentage point to total U.S. GDP growth over the next few years. That outcome would push U.S. manufacturing GDP to $4.5 trillion by 2030, up from roughly $3 trillion today.
The U.S. aerospace and defense business has always been a core component of total manufacturing activity. Its importance appears to be growing.
To be sure, higher Western defense spending will drive higher spending in other regions. China plans to increase its defense spending by 7% in 2026, to about $280 billion, according to U.S. brokerage firm Jefferies.
Wages are different in the U.S. and China. A dollar goes a little farther there. China might be spending roughly one-quarter of what America does, but some rough math suggests China could purchase about half of the new equipment the U.S. buys annually.
That's only an estimate. In recent years, China has focused on developing its naval, missile, and drone technologies. China's navy is now larger than America's, though its ships, on average, are smaller.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 06, 2026 17:55 ET (22:55 GMT)
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