The war is exhausting US arsenals – why replenishing missile stockpiles will take years and what it means for Ukraine

CSIS says the U.S. depleted thousands of precision-guided missiles in the campaign against Iran, including over 1,000 Tomahawks, 1,060-1,430 Patriot missiles, and up to 290 THAAD interceptors. Replenishment could take until 2029-2031, with Patriot stockpiles needing at least until mid-2029 and Tomahawks potentially not normalizing until 2030-2031, creating a "window of vulnerability" versus China. The report also implies tighter U.S. missile allocations for Ukraine as Patriot deliveries may be prioritized for domestic and allied needs.

Analysis

RTX is not just seeing a headline-demand bump; this is a multi-year re-pricing of missile content intensity per unit of geopolitical risk. The bottleneck is less about end-demand and more about throughput: if the Pentagon prioritizes replenishment, prime contractors with the deepest exposure to Patriot-class interceptors and terminal defense electronics should see improved booking visibility, while lower-tier suppliers with long lead items will become the true constraint and likely gain pricing power.

The second-order winner is the U.S. industrial base outside RTX: motor housings, energetics, semiconductors, and specialty metals suppliers should benefit as primes race to de-risk component dependencies and add shifts. That matters because margin expansion may show up first in the supply chain, not the headline name, especially where program mix shifts toward urgent procurement and away from development-heavy work.

The biggest risk is policy cyclicality, not technical execution. If the administration rations exports to allies and Ukraine to rebuild domestic inventories, near-term order flow can look strong while international deliveries slip, creating a political overhang for any contractor tied to foreign military sales. The more important catalyst is the 2027 budget cycle: once procurement volumes are locked, the market will have to price a 24-36 month revenue bridge rather than a one-quarter news spike.

Contrarian angle: the market may be underestimating how much of the replenishment eventually spills into capacity capex and working capital rather than immediate earnings. That can delay FCF conversion even as backlog rises, which argues for owning the highest-quality platform names on pullbacks rather than chasing the first burst of sentiment.

Key Decisions for Investors

• Go long RTX on 6-12 month horizon; use pullbacks to build a position. Thesis: replenishment visibility and priority funding should support backlog, but expect choppy margin/FCF timing, so size for a 15-20% upside case with 8-10% downside if export prioritization worsens.
• Pair trade: long RTX / short a lower-quality defense supplier with weaker missile content and less U.S. procurement leverage (e.g., TDG or a diversified industrial proxy if defense-specific borrow is tight). Timeframe: 3-9 months; goal is to capture the relative rerating in missile-heavy exposure.
• Buy out-of-the-money RTX calls 6-9 months out into any budget or procurement headlines. This is a convexity trade on a supply-rebuild cycle; risk is limited premium, reward is a re-rating if 2027 quantities are pulled forward.
• Add a basket position in defense supply chain enablers tied to propellant, electronics, and specialty materials on dips. This is the cleaner second-order trade because capacity expansion should tighten the chain and lift pricing power faster than prime EPS.
• Avoid chasing international FMS-dependent names near term; if Washington reallocates inventory to U.S. needs first, those order streams become the pressure valve. Better entry is after any announced delay, when the market typically over-penalizes the foreign-sales exposure.