Pentagon Awards Mega Contracts to Firms Amid Iran War Strains

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(Bloomberg) — The Pentagon is accelerating defense production with multiyear mega contracts as the Trump administration seeks to enhance the armed forces and the Iran war intensifies demands on a dwindling US weapons stockpile.

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On Wednesday alone, the Defense Department announced two massive contracts worth about $135 billion to major US defense companies. The administration has more broadly requested $1.5 trillion for an unprecedented defense budget amid what it calls a necessary generational investment to prepare for future conflicts. 

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The Army reported a $59 billion, seven-year agreement with Lockheed Martin Corp. to bolster production of in-demand but hard-to-replace Patriot interceptors that have been crucial to the Middle East conflict. 

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At the same time, the Pentagon unveiled contracts worth as much as $76.6 billion for General Dynamics Corp. and Huntington Ingalls Industries Inc. to expand construction of the US’s top nuclear submarines and make shipyard infrastructure improvements. 

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The awards include nine new latest model “Block VI” Virginia-class attack submarines, equipped with an expanded capacity for Tomahawk cruise missiles. The contracts also cover five additional Columbia-class nuclear-missile submarines in the planned fleet of 12. 

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Shares of General Dynamics rose 2.6% in after-hours trading in New York, while Huntington Ingalls’ stock gained 3.9%. Lockheed’s shares advanced 0.5% after the announcement of its award following the close of regular trading.

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The multiyear deals help lock in arms suppliers and give defense contractors the confidence to increase capacity on production lines. There have been numerous contracts announced after the Pentagon’s top officials, including Defense Secretary Pete Hegseth, complained that major contractors were delivering products late and over budget.

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The Iran war has only heightened concerns about the American defense industry. US forces in the Middle East are using up vast amounts of high-value interceptors — costing around $4 million each — to defend against Iran’s ballistic missiles and one-way attack drones. 

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Persian Gulf nations have also deployed Patriot missiles to defend themselves against hundreds of missile and drone attacks on energy facilities and other critical infrastructure as the conflict expanded across the Middle East. 

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The agreement announced Wednesday is Lockheed’s second major long-term missile production deal. Earlier this year, The company was awarded a contract that could be worth as much as $35 billion from the Pentagon to quadruple production of the Terminal High Altitude Area Defense, or Thaad, interceptors, over seven years.

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The new Lockheed contract will help the firm step up from roughly 600 missiles a year to about 2,000 annually by 2030. But even that may not be enough for a US war effort in an extended conflict, particularly against a more powerful country than Iran, such as China. 

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