Al Root

The Pentagon is seeking an additional $200 billion to fund the conflict with Iran.

That's a lot of money -- and good for defense contractors -- but what it might mean for the total defense spending, and defense stocks, in the coming year is less clear.

On Wednesday, The Washington Post reported the $200 billion figure. The White House didn't immediately respond to a request for comment about the report.

The initial question is, what is all that money for? "Middle East War-related costs had been reported to total $50 billion," wrote Capital Alpha Partners analyst Byron Callan. "There are open questions about where the other $150 billion came from and what this all may mean for the fiscal year 2027 request."

To be sure, the conflict is ongoing. The early phases of the war cost an estimated $1 billion per day. And the Trump administration is expected to replenish and stockpile key weapons systems used in Iran, including interceptor missiles and anti-drone technologies.

Still, most of the Defense Department's funding comes from the federal budget. The fiscal year 2027 budget, issued by the White House, is due in April. (The federal government's fiscal year ends in September.) The fiscal year 2026 budget included roughly $850 billion for national defense. Another $150 billion was included in the One Big Beautiful Bill Act, bringing annual defense spending to roughly $1 trillion.

Another $200 billion in supplemental spending, passed before Sept. 30, would push fiscal year 2026 spending to about $1.2 trillion.

President Donald Trump floated a $1.5 trillion defense budget for fiscal year 2027 in January, implying a 50% increase over the non-supplemental enhanced $1 trillion figure. Wall Street doesn't expect a 50% one year increase. A $200 billion supplemental this year could reduce the need for a similarly large increase in the 2027 budget request.

Still, analysts and investors expect defense spending to rise faster than in recent years. For investors, who tend to think in calendar years, the total amount spent in 2026 and 2027 likely matters more than exactly how the Pentagon allocates its funding. Anything that implies 5% to 10% annual spending growth for the next few years would be supportive for the sector.

Rising defense spending has been a boon to defense stocks. Coming into Thursday trading, the iShares Aerospace & Defense ETF was up 48% over the past 12 months. Lockheed Martin stock has gained 36%.

Lockheed stock and the iShares ETF, however, were down 2% and 5%, respectively, since the Iran fighting began. There could be concern about excessive spending or about what a de-escalation with Iran might mean for defense spending down the road. More likely, however, is that war introduces uncertainty, and investors tend to pull back when visibility is limited.

The iShares ETF was down 2.7% in midday trading, while the S&P 500 and Dow Jones Industrial Average were 0.6% and 0.7%, respectively.

The supplemental request probably isn't pushing stocks lower. Oil prices were up again as the Iran conflict continues. That's putting pressure on many shares, including Boeing stock, which is down 3.2% in midday trading.

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.

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March 19, 2026 12:55 ET (16:55 GMT)

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