Who’s making money? The arsenal trade after Ukraine and Iran

Defense is no longer a defense business, and nowhere is the question of who buys, who builds and who is left behind more evident than in Australia, he writes Professor Vince Hooper.

Markets, missiles and the end of peace – and what it means for Australia

The South Korean missile maker, which most Western investors could not place on the map two years ago, has reached an all-time high. LEAGUE Nex1, a precision guided munitions and electronic warfare specialist headquartered in Yongin, almost quadrupled From its base in January 2025, it reached 899,000 won on March 6, 2026; A few days after American and Israeli planes struck Iran’s nuclear and missile facilities.

Korean defense sector as a whole returned rudely 137 percent last year. These are not numbers from some sleepy industry magazine. These are numbers for an asset class that are being repriced in real time.

Defense is no longer a defense business. IT like that trade. And nowhere is the question of who’s buying, who’s building and who’s stuck in the queue more evident than in Australia.

Canberra is in the queue

For Australia, ammunition trading is not an abstract market story. It’s a mirror.

AUKUS is now a strategy and a buying queue rather than the cost of waiting. Virginia class submarines As the Indo-Pacific darkens, discussing it in polite company becomes uncomfortable.

In fact, Canberra pays high prices for late delivery, while Korean and Japanese shipyards offer shorter lead times at lower costs.

Hanwha approved 19.9 percent strategic stake Australiacleared by both Committee on Foreign Investment in the United States (CFIUS) and Canberra Foreign Investment Review Board (FIRB), construction of Henderson shipyards in late 2025 (currently Australian Maritime Complex), AS9 Hunter being built by the self-propelled howitzer program hanwha It’s no coincidence that it’s in Avalon, near Geelong. These are the first signs of Australia’s defense industrial base quietly pivoting away from Anglosphere dependence and towards truly serviceable Asian arsenals.

Voltage can be seen in real time. Aspect Sydney Morning Herald reported last weekDuring tensions in the Middle East, Canberra’s first crisis call was made to Beijing rather than Washington; This is a reflex reversal that would have been unthinkable a decade ago, and it tells you more about the perceived reliability of the American warranty than any AUKUS statement.

The ASX noticed, although the cabin did not: Drone Shield, Electro Optical Systems, codan and Austal attracted the kind of investor interest that would only come if the market decided that a sector’s tail risks had thickened permanently.

From cost center to industrial sweetheart

The Ukrainian War did the structural work. It transformed Defense from a politically awkward title into the trendiest corner of industrial policy and taught Western treasures an uncomfortable lesson about how weak their magazines really were. Three years of artillery duels Donbas The stocks that NATO had quietly assumed would last a generation have been depleted.

The Middle East conflict is the second shock. patriotic interceptors, Terminal High Altitude Air Defense (THAAD) is reloaded, Iron Dome Repairs, SM-3s, 155mm bullets, stray ammunition – Each salvo over the Gulf is, in accounting terms, an event of revenue accrual in Arizona, Alabama, Haifa or Daejeon. Governments that spent the 2010s poring over inventories assuming a benign world are now writing checks to rebuild them, and they’re writing those checks on the same handful of balance sheets.

Who specifically makes money?

Four layers are visible.

First, American primes — LockheedMartin, RTX, Northrop Grumman, General Dynamic, L3Harris. They cover the renewal agreements, integration work, and multiyear framework agreements that Congress has implemented with rare bipartisan enthusiasm. Backlogs have reached record levels, and after two decades of monopsony complaints, pricing forces have quietly reversed.

Second, the awakening of Europe — Rheinmetall, BAE Systems, Leonardo, Saab AB, Thales. of Germany Zeitenwende turned out to be real and especially Rheinmetall actual The shell smelter is trading more like a leveraged proxy for NATO than an industrial stock. Article 5 itself.

Third, and most interesting from Australia’s location, are Asian arsenals. Hanwha Aviation, Korean Aerospace IndustryHanwha Systems and LIG Nex1 as well as the opening paragraph Mitsubishi Heavy Industries And kawasaki in Japan. South Korea has done what Europe has failed to do for 30 years: build a deep, exportable, price-competitive defense industrial base with delivery times measured in months rather than decades.

Warsaw noticed first. Riyadh, Canberra and Cairo are now realizing this. Israel’s own Elbit, Raphael And IAI Stand alongside them as technological pacesetters, especially in the field of air defense and electronic warfare, for whom the exchange with Iran is a brutal but effective live-fire demonstration.

Fourth, invisible compounders – repulsive chemists, rare earth magnet refineriesspecial steel mills, gallium nitride foundries, International Traffic in Arms Regulations (ITAR) has cleared its software stores, maritime insurers are writing war risk coverage for Hormuz crossings at multiples of last year’s premium. This is where quiet fortunes are made. Lynas Rare EarthsSituated in one of the few heavy rare earth supply chains outside of China, it belongs in this tier regardless of whether the market has fully priced it.

Gulf parallel

for Gulf Cooperation Council (GCC)’s calculation is different and more cynical than Australia’s, but the underlying logic is the same. Every Gulf capital is simultaneously a customer, a forward-looking base of operations and a potential target. Accordingly, the wealth of the state turns towards defense rather than away from it. Saudi Arabia in particular is building domestic primes such as: Synchronized Accessible Media Exchange (SAMI) — wholly owned Public Investment Fund and we clearly aim to be among the world’s top 25 defense companies by 2030.

The issuance of security capacity has become a new instrument of influence and follows the doctrine of capital flows more faithfully than any white paper. Australia is on a more moderate version of the same curve, with Henderson district targets and the Hanwha partnership.

Disturbing coda

None of this is a celebration. The rising LIG Nex1 share price is ultimately an implied judgment from the market that more young people will be killed in more places with better designed weapons. The honest analyst makes this compromise rather than hiding behind the chart.

But the honest analyst also tells the truth about incentives. The Ukraine War didn’t make defense contractors rich by accident, and neither did the Iranian attacks. Governments that for a generation viewed deterrence as a sunk cost are now paying the bill they should have paid all along, and the firms that kept the order books are predictably getting richer.

CNN reported over the weekend it was reported that US intelligence believes China is preparing to launch shoulder-launched air defense missiles (MANPADS) to Iran during the current ceasefire – a claim Beijing has officially denied. If the news is true, this single fact reframes the arsenal trade as an open great power contest rather than a Western supply cycle, causing every defense ministry from Canberra to Riyadh to recalculate how long it can stand waiting in the AUKUS queue.

For Australia, the question is sharper than most. Canberra can continue to wait for the Virginia-class boats and hope that the phone in Washington is still answered, or it can do what Warsaw and Riyadh are already doing; it could support genuinely serviceable arsenals and recognize that strategic autonomy in 2026 is more like a supply contract with Daejeon, Tokyo, Henderson or Geelong than an alliance white paper.

The dividends of post-Cold War peace have been spent. Its replacements are already listed, traded, and already on the front page. The only unanswered question is whether Australia is reading the same page as the rest of the market.

Professor Vince Hooper is a proud Australian-British citizen and professor of finance and discipline at the SP Jain School of Global Management, which has campuses in London, Dubai, Mumbai, Singapore and Sydney.

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