US drains critical missile stockpiles in Iran war as yearslong rebuild looms

This is less a near-term earnings story than a multi-year capacity reset for the entire precision-munitions stack. The key second-order effect is that replenishment demand is now competing with allied restocking and Ukraine sustainment, which means order books can stay elevated even if headline conflict intensity fades. That shifts the sector from episodic surge pricing to a longer duration revenue cycle, especially for suppliers with the deepest content across seekers, motors, and guidance electronics.

The market’s mistake is likely to focus only on prime contractors. The tighter bottleneck is in the sub-tier industrial base — energetics, specialty metals, propellant, and qualified electronics — where qualification lead times and sole-source exposure can turn small capacity adds into pricing power. That should support gross margins for the right component vendors even as primes face pressure to accelerate output and accept fixed-price or multi-year contracting that caps near-term upside.

Near term, the biggest catalyst is budget conversion: if the FY27 request translates into actual multi-year procurement awards, the stock re-rating can happen before unit deliveries. The main risk is political and operational drag — Congress may trim the topline, the Pentagon could re-sequence priorities away from Patriot/THAAD if the threat picture shifts, or a ceasefire could reduce urgency. But because production lead times are measured in years, any pause in conflict only slows the drawdown; it does not erase the need to rebuild inventories.

Contrarian angle: the consensus may be underestimating how much of the upside is already in the primes, especially if investors crowd into the obvious beneficiaries. The more attractive asymmetry may be in names tied to missile propulsion, countermeasure components, and defense electronics, where incremental capacity expansion can drive earnings leverage without the same headline risk. If allies begin to doubt delivery reliability, this also creates a structural incentive to diversify away from U.S. systems — a slow-burn headwind for export-dependent primes, but a tailwind for domestic industrial capacity expansion themes.