Defence technology opportunities in a changing geopolitical landscape

Key Points

• It is increasingly evident that our earlier thesis—that we are entering an era of rising geopolitical tensions—is beginning to materialise.
• As of 26 March 2026, the ongoing conflict between the U.S.-led coalition, Israel, and Iran (referred to as Operation Epic Fury) has resulted in one of the fastest depletions of precision-guided munitions and defence inventories in modern history, and replenishment is needed.
• This conflict has highlighted the rapid “democratisation” of air power through the use of low-cost, autonomous systems. In recent years, few military technologies have reshaped warfare as rapidly as drones.
• Even prior to this conflict, defence demand was already firm. The Iran conflict represents a new chapter in global defence readiness. Regardless of when the war ends, it has already served as a wake-up call for countries worldwide on the importance of military preparedness.

Israel:

Israeli military spending reached approximately USD 6.4 billion in the first 20 days of the war against Iran. Stockpiles of long-range ballistic missile interceptors have fallen to critically low levels as the conflict continues to place sustained pressure on the country’s layered missile defence system.

To maintain its defence capabilities, Israeli lawmakers have approved an increase in the defence budget to NIS 143 billion (USD 45.8 billion).

Iran:

While Iran deploys relatively lower-cost systems (such as drones and older ballistic missiles), its expenditure remains substantial relative to its overall defence budget. Estimates suggest Iran launched between 470 and over 500 ballistic missiles at Israel within the first 25 days of the conflict, at a projected cost of around USD 6 billion—equivalent to nearly 20% of its 2026 defence budget.

Table 2: Key Munitions Usage at D+6 and FY 2026 Deliveries

Figure 2: Estimated total cost of Operation Epic Fury at D+12 (USD, millions)

Source: CSIS (Authors' estimates using FY 2026 DOD budget documents)

The "Drone Revolution"

This conflict has highlighted the rapid “democratisation” of air power through the use of low-cost, autonomous systems. In recent years, few military technologies have reshaped warfare as rapidly as drones.

Iran has been a heavy user of drones, particularly in the early stages of the war. The data (930 drones and 269 missiles by Day 4) represent roughly half of the total reported launches (more than 2,000 drones and 500 ballistic missiles by Day 4). For comparison, Russian missile and drone launches have at times reached 700 per day, while Iran sustained similar levels only during the first few days of the conflict.

The subsequent decline reflects U.S. and Israeli strike campaigns targeting Iran’s missile and drone inventories, manufacturing facilities, and launch systems. The Israel Defense Forces reported that 70% of Iran’s ballistic missile launchers had been disabled by Day 16. Without such disruptions, drone deployment levels would likely have been even higher.

On the other hand, while large-scale drone deployment was less practical for the U.S. due to distance constraints, the conflict marked an early shift in American drone doctrine. It saw the combat debut of the LUCAS (Low-Cost Unmanned Combat Attack System). Although exact deployment numbers remain classified, the Pentagon confirmed that “dozens” were used in initial strikes to neutralise Iranian radar systems—supporting earlier remarks by the U.S. president on reducing the need for boots on the ground.

This “drone revolution” represents a fundamental shift in modern warfare and is likely to shape the future conduct of war.

Figure 3: Hotspots for drone warfare in 2026

Table 3: DOD-released figures on Iranian Launces 

Figure 4: UAS detections or interceptions, as reported by Bahrain, Kuwait, Saudi Arabia, and the UAE, Days 1-23

Global X Defense Tech (SHLD)

The Global X Defence Tech ETF remains a vehicle for gaining exposure to both traditional defence and the increasing role of technology in warfare. The ETF spans sectors such as industrials, cybersecurity, artificial intelligence, and drone systems.

Its holdings include companies such as RTX and Lockheed Martin, which are key beneficiaries of the supplemental defence budgets being approved in Washington, D.C., and Tel Aviv.

Table 4: Top 10 companies within the Global X Defense Tech ETF