***Note: This article discusses the financial dimensions of an active military conflict. The human cost of war is immeasurable and always takes precedence. Our thoughts and prayers are with all those affected.
There is a familiar question when military operations take place: “What is the cost of war?” It’s a question that can be viewed from many different angles: human, economic, and social. Since last Saturday, the United States and Israel have been conducting a sustained military campaign against Iran, dubbed Operation Epic Fury and Operation Roaring Lion, respectively. We are not here today to discuss politics, ideology, or whether this was the right decision. People are losing their lives on all sides of this conflict, and that reality deserves a gravity that no “weekly update” can fully convey. Moreover, with clients and their families currently in Israel, the human element is even more in focus.
With that said, if you’ve been reading our update for some time, you know we like to look at stories from a unique perspective. And since we are finance/technology-focused, we believe it is worth understanding the sheer scale of the financial forces at play. Because the operations are staggering, and they ripple far beyond the theater of combat.
The Offensive Arsenal
Modern military operations use a wide range of weapons, each designed for a specific role. Understanding what they are and how much they cost is the first step to understanding the dynamics of this conflict.
The opening salvo relied heavily on Tomahawk cruise missiles. The Tomahawk is a long-range system that can hit targets up to 1,000 miles away, guided by GPS and terrain-mapping. They are launched from Navy destroyers and submarines, which means the U.S. can strike deep inside a country without putting a pilot at risk. The trade-off is cost. The latest variant runs approximately $2.5 million per missile, and once it’s fired, it’s gone. Analysts estimate that roughly 200 Tomahawks were launched in the campaign’s early phase, putting the Tomahawk bill alone around $500 million.
When you need to hit hardened, buried targets, like Iran’s underground missile production facilities, you send in the B-2 Spirit stealth bomber. The B-2 is an aircraft specifically designed to penetrate advanced air defenses undetected and can carry 40,000 pounds of ordnance. The stealth bombers flew nonstop round-trip missions from Whiteman Air Force Base in Missouri, armed with 2,000-pound JDAMs (Joint Direct Attack Munitions), essentially conventional “dumb” bombs retrofitted with GPS guidance kits that turn them into precision weapons. A JDAM kit costs about $30,000, making it the budget option of the precision arsenal. The B-2 itself, however, is anything but budget. At roughly $150,000 per flight hour, driven by its exotic radar-absorbing skin that requires painstaking maintenance, those round-trip bomber missions alone ran up an estimated $30 million in operating costs before a single bomb was counted.
Meanwhile, carrier-based fighters like the F/A-18 Super Hornet and F-35 Lightning II have been flying continuous strike sorties. These are the multi-role workhorses: they can dogfight, drop bombs, or suppress enemy air defenses. The Super Hornet costs approximately $30,000 per flight hour; the stealthier F-35 runs closer to $42,000. The Air Force has also deployed land-based F-22 Raptors (America’s premier air superiority fighter, roughly $60,000 per flight hour) and F-15E Strike Eagles (approximately $30,000 per hour). When dozens of aircraft are flying multiple sorties per day, the flight-hour bills accumulate at an astonishing rate. And this doesn’t even account for the cost of operating the two aircraft carriers in theater.
The More Expensive Side of the Ledger
And while that sounds pricey, here is where the math starts to feel almost absurd. The defensive side of this conflict may actually be more expensive than the offensive.
Iran has responded with waves of ballistic missiles and drones aimed at Israel, Gulf allies, and U.S. bases. To knock those threats out of the sky, the U.S. and its partners are using a layered defense system, and each layer comes with an eye-popping price tag. The Patriot system is the most widely deployed. It is a ground-based missile defense system that tracks incoming threats with radar and fires interceptor missiles to destroy them. Patriot interceptors come in several variants, but they cost approximately $4 million per shot.
For higher-altitude, faster-moving threats, the military uses THAAD (Terminal High Altitude Area Defense), a specialized system designed to destroy ballistic missiles as they descend from the edge of space. Each THAAD interceptor costs roughly $12.5 million. At sea, Navy ships equipped with the Aegis system fire SM-6 interceptors (approximately $4 to $9 million each, depending on the variant) and SM-3 interceptors (up to $28 million for the most advanced version) to provide an additional shield.
In one reported instance, 11 Patriot missiles were fired to neutralize a single incoming Iranian ballistic missile. That’s $44 million dollars to stop one projectile. Meanwhile, the Iranian Shahed drones that Gulf nations have been swatting down by the hundreds cost Iran only $26,000 each to build. Trading one Patriot for one Shahed drone, the defensive protection costs 150x more than what Iran spends launching them. It’s an interesting nuance that has required a response from the U.S.
This cost asymmetry is precisely why the U.S. and Israel are looking for other options. For the first time, the U.S. introduced the LUCAS (Low-cost Uncrewed Combat Attack System) drone in this conflict. It is a system priced at roughly $35,000, a fraction of a Tomahawk and modeled after the Iranian Shahed drone. And also for the first time, Israel is reportedly using its “Iron Beam” laser defense system, which can theoretically shoot down drones or rockets with a focused beam of energy. What’s even better, it does so while consuming only a few dollars’ worth of electricity. The lesson is becoming clearer. Wars of attrition are going to be won not by who has the most expensive weapon, but by who can sustain and produce the weapons of war the longest.
Impact Duration > Conflict Duration
Putting a bow on the direct costs, the first 24 hours of Operation Epic Fury will have cost approximately $1 billion.
But the military ledger, as enormous as it is, doesn’t capture the full economic picture. Within hours of the first strikes, airspace across the Middle East was largely shut down, with more than 5,000 flights cancelled in the first two days. Dubai International Airport, the world’s busiest for international passengers, effectively ground to a halt. Tour operators from Germany to Japan scrambled to evacuate stranded tourists. Governments across Europe issued “no-go” advisories for the entire Gulf region.
This week, Tourism Economics (a division of Oxford Economics) released projections that give global investors pause. Prior to the conflict, the Middle East was forecast to see 13% growth in international tourism for 2026. That projection has been obliterated. Under an optimistic scenario where the conflict resolves within a few weeks, the region could lose 23 million visitors and $34 billion in tourism spending this year. Under a protracted scenario lasting one to two months, those losses balloon to 38 million fewer visitors and $56 billion in lost spending (a 27% year-over-year decline). For context, the Middle East’s tourism industry generates roughly $367 billion annually, so we are potentially talking about erasing roughly 15% of the region’s entire tourism economy in a single year.
The Gulf Cooperation Council (GCC) states (UAE, Saudi Arabia, Qatar, Bahrain, Kuwait, and Oman) stand to be hit the hardest, even though the fighting is concentrated in Iran. These nations invested heavily in positioning themselves as safe, glamorous tourism destinations. Saudi Arabia’s Vision 2030, the UAE’s relentless development of Dubai and Abu Dhabi, and Qatar’s post-World Cup momentum all depended on perceptions of stability. That perception has been shattered, and could take far longer to rebuild than the physical infrastructure. The Middle East also accounts for roughly 14% of all global international transit traffic, meaning the disruption isn’t contained to the region. Rerouted flights between Europe and Asia mean higher fuel costs, longer travel times, and higher ticket prices, which pressure airlines and travelers worldwide.
Following the Markets
Unsurprisingly, defense stocks have surged since the conflict began. Lockheed Martin, the maker of THAAD and Patriot missiles, has seen its share price climb significantly since the beginning of the year as tensions escalated. RTX (formerly Raytheon), which builds the Patriot radar systems, and the broader defense sector ETF have both seen meaningful pops. When interceptors are being consumed faster than they can be manufactured, the companies that build them have pricing power and guaranteed demand for years to come. Lockheed recently signed a deal with the Pentagon to quadruple THAAD interceptor production from 96 to 400 per year.
Meanwhile, oil prices have spiked on fears surrounding the Strait of Hormuz, through which roughly 20% of the world’s oil supply passes daily. That has a direct impact on jet fuel, shipping costs, and the broader cost of doing business globally. For investors, the second-order effects of energy prices, airline margins, tourism, and insurance premiums for Gulf-region assets may matter more over the long run than the initial defense rally.
The Cost is High
There is no tidy investment lesson to draw from an active conflict where people are dying, and it would be irresponsible to try. But ignoring the financial dimensions isn’t an option either, because these numbers have a way of showing up in places you wouldn’t necessarily expect; at the gas pump, your airline ticket, the next earnings call from a company that ships through the Gulf.
What this conflict makes clear is the staggering cost of modern warfare, not just in human costs, but in the cascading economic disruption that follows. A $12 million interceptor may stop a ballistic missile, but it doesn’t stop the cancelled flights, the shuttered hotel lobbies, or the repricing of risk across an entire region. The direct military spend is enormous. The energy disruptions affect everyone. And the munitions that need to be replenished will take years and tens of billions of dollars to manufacture.
But while we can quantify those direct costs, it always comes back to the human element. There are vast impacts. Whether dealing with the psychological effects of living through the fear of constant missile attacks or paying the ultimate sacrifice with the loss of life, the consequences are very real. All we can hope for is that this conflict will end soon and that the world will be a better place when it’s over.
Markets / Economy
- Unsurprisingly, markets were extremely volatile with the launch of military operations in the Middle East. The S&P finished the week down -2.0%, the Nasdaq down -1.2%, and the small-cap Russell 2000 down -4.1%.
- Labor productivity in the U.S. nonfarm business sector rose 2.8% in the fourth quarter of 2025, slowing from a sharp 5.2% increase in the previous quarter but exceeding market expectations of a 1.9% gain, according to preliminary estimates.
- The U.S. economy shed 92K jobs in February, the most in four months, following a downwardly revised 126K rise in January and much worse than forecasts of a 59K gain.
Stocks
- U.S. equities were in negative territory. Materials and Consumer Staples led the decline, while Energy and Communication Services outperformed. Growth stocks led value stocks, and large caps beat small caps.
- International equities closed lower for the week. Developed markets fared better than emerging markets.
Bonds
- The 10-year Treasury bond yield increased 17 basis points to 4.13% during the week.
- Global bond markets were in negative territory this week.
- Government bonds led for the week, followed by high-yield bonds and corporate bonds.
