What the Wars in Ukraine, Lebanon, Gaza, and Iran Reveal About the New Defence Economy

By Elijah J. Magnier – 

For decades, defence contractors occupied a peculiar place in equity markets. They were not growth stories, nor were they especially innovative in the Silicon Valley sense. Instead, they offered something more prosaic and reassuring: predictable government contracts, stable margins, and dividends that rarely surprised. Defence stocks were defensive in both military and financial terms. That model is now being dismantled.

Across global markets, a new class of defence firms is attracting investor capital not because of stability, but because of volatility, technological disruption, and the promise of rapid earnings expansion. Companies such as Kratos Defense & Security Solutions, Palantir Technologies, Planet Labs, AeroVironment, and BlackSky have seen their share prices surge, in some cases doubling within a single year. These firms do not resemble traditional arms manufacturers. They operate closer to technology companies, specialising in data analytics, unmanned systems, satellite intelligence, and software that converts information into military advantage.

This shift is not cosmetic. It reflects a deeper transformation in how wars are fought, how defence budgets are structured, and how states convert fiscal resources into strategic power. As warfare becomes faster, more distributed, and more data-driven, capital is following the firms best positioned to monetise that change.

From platforms to systems

The old defence-industrial model was built around platforms. Fighter jets, tanks, aircraft carriers, missile systems, and armoured vehicles dominated procurement cycles and shaped contractor hierarchies. Companies such as Lockheed Martin, RTX, and Northrop Grumman became indispensable because they could design, manufacture, and sustain highly complex machines over decades-long lifecycles.