After more than 100 days of fighting, the U.S. and Iran have reportedly reached an agreement to reopen the Strait of Hormuz, a breakthrough that, if implemented, should ease the deepest global energy shock in decades and may finally set the stage for an end to the war.
For the U.S. defense industrial base, however, the structural damage is already done, and the clearest evidence is that Washington is now openly choosing which partners get American weapons. The policy response is moving in our portfolio’s direction on two fronts.
The War Is Burning Through the Arsenal Faster Than It Can Be Rebuilt
The United States has expended more than 1,000 Tomahawks and well over 1,000 Patriot interceptors since the conflict began, alongside heavy draws on SM-3, SM-6, and THAAD. Independent estimates now put the return to pre-war Patriot inventory at mid-2029 and the return to pre-war cruise-missile stocks at 2030–2031.
Senior leadership has called the munitions concern “foolishly and unhelpfully overstated,” but the government’s own actions tell a different story.
Last month we flagged that the delays hitting Europe would reach Asia, and that the U.S. was triaging its allies more openly than at any point since the Cold War. Both have since intensified.
A $14 billion arms package to Taiwan has been paused to preserve munitions for the Iran campaign, and Japan has been warned of serious delays on 400 Tomahawks, even as $8.6 billion in emergency sales were fast-tracked to Middle East partners last month.
The new entrants rebuilding magazine depth at commercial speed are precisely what the Pentagon now needs. Notable examples from the portfolio are Firehawk in additive solid rocket motor and 155mm base bleed production, and Castelion in low-cost hypersonic strike.
Congress Is Rewriting the Rules in Favor of New Entrants
Both the House and Senate released their FY27 defense policy bills this month, at $1.15 trillion and $1.14 trillion respectively, and both took direct aim at the industrial base in ways that favor the kind of companies we back.
The House bill would stand up a solid rocket motor qualification working group and require more than one SRM supplier for certain munitions, a structural mandate for exactly the redundancy Firehawk is building toward. The Senate bill adds right-to-repair language, strengthening the case for distributed, field-serviceable manufacturing over single-source legacy production.
Most striking, House authorizers openly criticized the Pentagon’s planned $1 billion direct equity investment in an L3Harris SRM spin-off, warning that putting the government’s “finger on the scale” for an incumbent could crowd out the startups raising private capital to stand up the same production. That is a remarkable on-the-record acknowledgment that policy should not disadvantage new entrants.
The signal is consistent: resilience comes from many distributed, advanced manufacturers, not a handful of consolidated primes.
And the shift is no longer theoretical. The drone boat that pulled a downed Army Apache crew from the water this month was Saronic’s Corsair, the first combat rescue by an unmanned surface vessel, and the Pentagon has begun testing rival AI models to end its reliance on any single vendor. These companies are no longer prototypes on the sidelines; they are in the fight.
Demand the legacy arsenal cannot meet, and a policy environment now tilting toward challengers: these forces compound directly into our portfolio.