Iran Tensions Highlight Defense Supply Gaps Poised to Lift 2 Stocks

Modern wars are exposing old supply shortages, and defense suppliers stand to benefit.

AeroVironment and L3Harris are positioned where demand is growing fastest: drones, missiles, and battlefield networks.

Strong backlogs create opportunity, but execution, politics, and defense budgets remain key risks.

When shipping lanes around Iran become combat zones, the world is reminded that modern militaries still run on some very old fundamentals: munitions, sensors, and logistics. Recent attacks and closures in the Strait of Hormuz and Red Sea have underscored how thin global defense supply has become, especially for drones, precision weapons, and artillery shells.

That stress does not just move oil prices. It can reshape the outlook for a handful of defense contractors that have been quietly scaling up for exactly this kind of environment.

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If you watch footage from contested regions, you see many small, lethal drones. AeroVironment (NASDAQ: AVAV) is one of the companies behind that reality. In February 2026, the company announced a $186 million U.S. Army order for its Switchblade 600 Block 2 and Switchblade 300 Block 20 loitering munitions, under a five‑year contract with a $990 million ceiling, first awarded in 2024. These systems are designed to let small units destroy armored vehicles and key targets without calling in larger missiles or aircraft.

For investors, that tells you two things. First, the U.S. is not treating loitering munitions as a niche experiment. The Army is rolling them into its core toolkit with multiyear funding and export support to allies. Second, AeroVironment is now on the hook to deliver at scale, which can deepen customer relationships but also test its own supply chain and manufacturing. The upside is clear in an era when U.S. Central Command talks about nightly drone and missile strikes around Hormuz and the Red Sea. The risk is that any production stumble or integration delay could sour confidence at a time when demand is hot, and alternatives are emerging.