Thirty-five thousand dollars.

That’s the cost of the Pentagon’s new Low-cost Uncrewed Combat Attack System—LUCAS for short—which made its combat debut this year in the conflict with Iran. Reverse-engineered from Iran’s Shahed drone design, the LUCAS is autonomous, long-range and capable of swarm strikes, all for about the price of a midsize pickup truck.

To put that in perspective, a Tomahawk cruise missile runs about $2.5 million. A Patriot interceptor? Around $4 million per shot.

Regular readers know I’ve long believed that government policy is a precursor to change, and right now, policy, geopolitics and technology are converging in a way I haven’t seen in my entire decades-long career in capital markets.

What’s emerging is a new defense-industrial revolution built on artificial intelligence (AI) and autonomy.

A $1.5 Trillion Defense Budget?

Let’s start with the macro picture because the numbers are staggering. President Donald Trump’s proposed 2027 budget calls for $1.5 trillion in defense spending, by far the largest dollar amount in modern American history. That’s includes $1.1 trillion for the Defense Department and another $350 billion earmarked for critical munitions and rebuilding the U.S. defense industrial base.

Tucked away in that $1.5 trillion figure is a line item I find especially interesting: $13.4 billion for “autonomy and autonomous systems.” In other words, drones and unmanned vehicles, not to mention the AI data centers that run them.

This tells me the Pentagon has acknowledged that the nature of warfare has fundamentally changed, and that the side with the smartest, cheapest, most numerous machines will have the upper hand.

Defense Secretary Pete Hegseth has already directed the Army to deploy drones in every division and to dramatically expand counter-drone capabilities by 2027. Meanwhile, the Air Force’s Collaborative Combat Aircraft (CCA) program is on track to spend nearly $9 billion building AI “wingmen” to fly alongside our F-22s and F-35s.

When the world’s largest customer commits this kind of capital, I believe smart investors should take note.

The First True AI War

Many analysts are already calling Operation Epic Fury the first real AI war, and with good reason. In just the opening weeks of fighting, close to 2,000 drone strikes were recorded. U.S. Central Command confirmed that “hundreds” of U.S. attack drones were deployed.

Meanwhile, Ukraine’s drone production has exploded from roughly 800,000 units in 2023 to nearly 5 million projected for 2026. In March, for the first time, Ukraine actually launched more cross-border attack drones than Russia did. It amazes me that a country that had essentially no domestic drone industry four years ago is now out-producing one of the world’s traditional military superpowers.

In this new AI era, the math has flipped. As one analyst put it, using a Patriot missile to shoot down a $35,000 Shahed costs the U.S. 100 times more than its costs Iran. That asymmetry is why every major military on the planet is scrambling to retool around cheap, smart, autonomous weapons.

And it’s not just offense. Israel’s new Iron Beam laser system, which saw its first use in combat last month, can knock incoming rockets out of the sky for about $2.50 per shot, compared to $50,000 or more for a traditional Iron Dome interceptor. AeroVironment’s Locust X3 laser counter-drone system, unveiled just last month, is reportedly even cheaper. 

Follow the Money

Investor demand for aerospace and defense is surging at the moment, judging by inflows.

In 2020, the entire global defense-tech venture capital sector raised just $869 million. Last year, that figure hit $11.2 billion, a more than tenfold increase in five years, according to Dealroom data.

On the public markets side, aerospace and defense ETFs pulled in a record $3 billion of net inflows last month alone, the biggest monthly haul ever recorded for the category. I don’t believe this is a one-month blip.

Look at what’s happening to the new generation of defense-tech firms. Palantir, the data-and-AI company, now has a market cap north of $300 billion, down from its peak of $475 billion at the end of October 2025. That puts the Miami-based firm ahead of traditional defense giants such as Lockheed Martin and RTX (formerly Raytheon). President Trump posted about Palantir today, writing that the company “has proven to have great war fighting capabilities and equipment.”

Anduril, the autonomous systems startup founded barely a decade ago, just closed a funding round at a $60 billion valuation, doubling for the second year in a row. According to Brennan Center research, Anduril’s revenue has been compounding at a median annual growth of 143% per year, making it the fastest growing major defense contractor.

And then there’s SpaceX, which has reportedly filed confidentially for what could be the largest IPO in history, at a valuation potentially pushing $1.75 trillion. That’s thanks in large part to its satellite contracts with the Pentagon.

What I’m Watching Next

The best investment opportunities often arise when three forces are in sync: 1) a powerful policy tailwind, 2) a genuine technological breakthrough and 3) a real-world use case.

Today, in defense tech, all three are flashing green at the same time.

I encourage every reader to do their own homework before making any investment decisions, but when the White House is seeking $1.5 trillion, when ETF flows hit record highs, and when the cost of fighting wars is being rewritten by $35,000 drones, I believe investors should take note.

Airlines and Shipping

Strengths

  • The best performing airline stock for the week was Air France, up 13.9%. In Delta’s first quarter, the company reported 64 cents in earnings per share, above expectations. Revenues were up 10%, with both corporate and leisure demand remaining strong, along with premium. Delta expects low teens growth in the second quarter, with half of the higher fuel prices being recovered through higher prices.

  • Shipping rates were up 2.4% this week and down 3.2% year-over-year (YoY) on routes to the West Coast, and up 3.8% this week and down 6.3% YoY to the East Coast. Rates on Europe routes were higher by 4.6% this week and down 2.1% YoY to Northern Europe, and up 5.4% this week and down 3.0% YoY to Mediterranean locations, according to Morgan Stanley.
  • China’s domestic fuel surcharge was raised six-fold, from Rmb20/10 to Rmb120/60, the steepest single adjustment in recent history. The hike, driven by surging oil prices amid Middle East tensions, immediately weighed on air demand, reports JP Morgan.

Weaknesses

  • The worst performing airline stock for the week was ANA, down 1.5%. Etihad Airways, the official airline of the United Arab Emirates, has started a price fight among the big three Gulf carriers. It is slashing fares by 50% in response to the war in the Middle East, which has sent demand for air travel in the region tumbling, according to Morgan Stanley.
  • Air seat capacity in the Middle East is down 62%, according to UBS. Traffic is down 62% to 100% in the UAE, Qatar, and Kuwait this week.
  • Grupo Aeropuerto Pacifico’s total traffic decreased 8.9% YoY in March. Traffic in Guadalajara and Tijuana decreased 2.3% and 8.7% YoY, respectively. In Los Cabos and Puerto Vallarta, combined traffic was down 15.5% YoY due to cartel activity. Traffic at Jamaican airports was down 19.7% YoY due to disruptions caused by Hurricane Melissa.

Opportunities

  • The source and sustainability of air travel strength is still somewhat unclear, which together with the war headlines and elevated jet fuel passthrough will make updates on the forward booking curve and summer activity paramount to how the airline group trades this earnings season. Successful passthrough of jet fuel without demand destruction will be seen as a triumph, though cracks in the booking curve would be a disappointment, according to Morgan Stanley.
  • After a month and a half of turmoil in the Middle East, container shipping lines have begun to adjust their approach to the surcharges they add to freight rates. Whereas at the start of the crisis these surcharges were applied broadly across routes and regions, they are now increasingly targeted at specific trade flows. This shift comes as the industry has gained a better understanding of where the pressure in supply chains is greatest, according to Shipping Watch.
  • Indian supply is growing +6% YoY for summer 2026 yet is tracking below demand. Domestic supply tightness is helped by Air India (-1% YoY), while international capacity is still seeing North America capacity cuts due to Pakistan airspace closures. Domestic rationalization is likely to persist through 2026-27, according to Bank of America.

Threats

  • According to RBC, Airbus SE reported 114 deliveries in 1Q26, 12 aircraft shy of consensus of 126. The company’s 60 deliveries in March included 8 A220s, 41 A320s (17 A320neos and 24 A321neos), 3 A330s, and 8 A350s. Deliveries in March were down (15.5%) compared to 71 aircraft in March 2025, and on a QTD basis, deliveries are down (16%).
  • Strait closures are wreaking havoc in shipping markets. Container ships rerouting away from the Red Sea increased 9-12% YoY in recent weeks. According to Clarkson’s, 11% of global oil and 6% of gas production is offline, sustaining the global scramble for alternative supplies.
  • Turkish Airlines said it will appoint Ahmet Olmustur as chief executive officer, replacing Bilal Eksi, who has retired. Murat Seker will take over as chairman of the board, succeeding Ahmet Bolat, who has stepped down from his duties. As part of the broader overhaul, the airline named Metin Gulsen as chief financial officer, replacing Seker, and appointed Harun Basturk as chief commercial officer, succeeding Olmustur.

Luxury Goods and International Markets

Strengths

  • Super‑luxury names outperformed the broader luxury sector this week, reflecting investor preference for scarcity, pricing power, and balance‑sheet strength in a volatile market. Notable outperformers include Hermès, Richemont (driven by Cartier and Van Cleef & Arpels), Brunello Cucinelli and Ferrari.
  • Brunello Cucinelli reported net revenue for the first quarter that beat the average analyst estimate. Asia revenue increased 11%, while Europe rose 4.2%. Americas, representing the largest share of total revenue, climbed to 9.4%.
  • Hotel Shilla, a hotel operator in South Korea, was the best performing name in the S&P Global Luxury Index over the past five days. The stock moved higher following a report published on April 6, that detailed aggressive cost‑cutting and restructuring in Hotel Shilla’s duty‑free business.

Weaknesses

  • Tesla reported weaker-than-expected first quarter deliveries, with production exceeding deliveries by more than 50,000 vehicles, leading to rising inventory. The mismatch points to softening demand and increasing pressure on pricing and margins, with consensus forecasts now calling for roughly –$5.1 billion in free cash flow in 2026.
  • Sales momentum in Europe has weakened alongside a sharp deterioration in sentiment. Sentix Investor Confidence for the euro area fell to -19.2 in April, down from -3.1 in March, marking the lowest level since the 2023 crisis and signaling a rapid loss of investor confidence.
  • Lucid Group, an electric vehicle maker, was the worst-performing name in the S&P Global Luxury Index over the past five days. Shares fell after the company reported first-quarter production and deliveries that came in below expectations.

Opportunities

  • Shares of LVMH fell 29% in the first quarter, marking the company’s steepest quarterly decline since its IPO in 1989. The selloff reflects concerns over travel disruption in the Middle East and rising oil prices, which have weighed on consumer sentiment. A proposed two-week ceasefire has raised hopes that, if it holds, oversold luxury stocks could see a rebound.

  • Amazon shares jumped on Thursday after management disclosed a $15 billion AI revenue run rate in the first quarter, driven largely by Amazon Web Services (AWS) demand. This level of revenue supports continued investment and helps ease concerns around elevated capital spending. With AI acting as a multiplier across AWS, retail, and advertising, Amazon is well positioned for long-term value creation.
  • According to Bloomberg research, Hermès first-quarter results could positively surprise, supported by improving Asia demand and a rebound in China. Its ultra-luxury, vertically integrated model provides strong pricing power, with mid-single-digit price increases helping protect margins despite inflation and macro headwinds. Leather goods, representing about 45% of sales, are expected to sustain double-digit growth.

Threats

  • Mercedes-Benz global sales declined 6%, driven by a sharp 27% drop in China—steeper than the 19% decline recorded in the fourth quarter—while sales in Europe and the U.S. improved. Competitive pressure is intensifying as Chinese automakers increasingly target Europe’s premium segment, long dominated by Porsche, BMW, and Mercedes-Benz. This week, BYD’s luxury Denza brand unveiled models for Europe, including its flagship Z9 GT, a roughly €100,000 EV offering ultra-fast charging and 0–62 mph acceleration in 2.7 seconds.
  • Upcoming U.S. CPI and consumer sentiment data next week could reinforce concerns that higher energy prices are pushing inflation higher. Interest-rate futures show traders have scaled back expectations for multiple cuts, with many now expecting the Fed to hold rates steady through most of the year due to resilient growth and renewed inflation risks tied to energy prices.
  • If the Middle East ceasefire fails or is violated, equity markets are likely to come under renewed pressure as geopolitical risk rises. Oil prices would likely jump, further squeezing consumer sentiment and dampening appetite for discretionary spending, including summer travel.

Energy and Natural Resources

Strengths

  • The best performing commodity for the week was copper, rallying 5.10%. Copper climbed to a three-week high of $12,780 per ton on the London Metal Exchange, on track for a third consecutive weekly advance as investors positioned ahead of U.S.-Iran peace talks in Islamabad, with Jefferies noting the metal “should outperform if we have sustained de-escalation.” Chinese import premiums on copper rose to a ten-month high on Friday, according to Shanghai Metals Market data, signaling strengthening immediate demand and reinforcing copper’s binary upside skew should the ceasefire hold, Bloomberg reports.

  • LibertyStream Infrastructure Partners has commenced lithium carbonate production at its direct lithium extraction (DLE) facility at Select Water Solutions’ Howard County, Texas site and secured its first U.S. purchase order, with delivery of the first tonne scheduled for June 2026 as part of broader offtake negotiations with an American lithium carbonate customer. The company is targeting annualized production capacity of up to 1,000 tonnes of lithium carbonate by the end of 2026, with plans to replicate its Permian Basin model across other high-volume U.S. basins, including the Bakken, advancing North America’s push for domestic lithium supply chain independence.
  • Ontario Power Generation has applied for a 20-year license to operate the BWRX-300 small modular reactor (SMR) at the Darlington New Nuclear Project, which is poised to become the first SMR to operate in a G7 country. Construction is already underway after the first regulatory hold point was lifted this week, clearing the way for reactor foundation work, with the first unit targeted to connect to the grid by the end of 2030.

Weaknesses

  • The weakest-performing commodity of the week was WTI crude oil, losing 13.98%. WTI crude oil recorded its largest weekly loss since August 2022 as a fragile ceasefire and weekend U.S.-Iran talks in Islamabad deflated the war premium, though uncertainty over the Strait of Hormuz keeps the outlook volatile. Israel’s continued strikes on Lebanon have complicated the truce, with Iran calling the attacks “a blatant violation” and warning that negotiations would be “meaningless” if bombing continued, MarketWatch reports.
  • Goldman Sachs warned that copper faces further downside risk if the Strait of Hormuz remains blocked, with analysts noting the metal is already trading well above their estimated fair value of around $11,100 per ton despite a roughly 7% decline since U.S.-Israeli strikes on Iran began. The bank trimmed its 2026 average copper price forecast to $12,650 per ton and cautioned that soaring energy prices could slow global growth and erode industrial demand, making copper vulnerable to another leg lower if the economic outlook deteriorates and investors de-risk.
  • Saudi Arabia confirmed that a recent wave of Iranian attacks reduced its production capacity and constrained flows through the East-West pipeline, which the kingdom has been using to export crude via the Red Sea, adding a new dimension to global supply disruptions beyond the Strait of Hormuz closure. Oil markets have been extremely turbulent since the conflict began, and while a fragile ceasefire is now in place, Iran’s new supreme leader Mojtaba Khamenei signaled that Tehran intends to bring “the management of the Strait of Hormuz to a new stage,” raising doubts about whether normalized flows can be quickly restored, Bloomberg reports.

Opportunities

  • The EU and U.S. are nearing a critical minerals agreement to create incentives, including minimum prices, that advantage non-Chinese suppliers, covering the full value chain from extraction through recycling. The deal comes as China processes more than 80 percent of the world’s rare earths, and Beijing’s export controls last year left European companies facing shutdowns, with both sides also seeking additional “like-minded partners” to broaden the accord, Bloomberg reports.
  • Bank of America strategist Michael Hartnett sees commodities replacing equities as the top beneficiary of the “anything but bonds” trade through the 2020s, as the Bloomberg Commodity Index has surged 35 percent since early 2025, more than double the S&P 500, driven by the Hormuz closure, AI infrastructure demand, and critical minerals competition. Hartnett sums up the stakes plainly: “Who owns the chips, rare earths, minerals, oil wins the AI war,” Bloomberg reports.
  • North American crude grades are surging as Asian and European refiners scramble for accessible barrels, with Bakken oil jumping to an $18 premium to WTI from a $1.20 discount before the Iran conflict began. Canadian synthetic crude and Gulf grades such as Mars have risen similarly, reinforcing U.S. and Canadian producers as the world’s preferred alternative supply source.

Threats

  • CATL appointed Zijin Mining founder Chen Jinghe as an advisor to its mining arm, deepening the battery giant’s push to vertically integrate critical mineral supply chains across copper, cobalt, and lithium. The move tightens China’s strategic grip over energy transition materials at precisely the moment the EU and U.S. are racing to build alternatives.
  • Iran’s near-closure of the Strait of Hormuz has exposed a critical gap in global energy security, refined fuels are rarely stockpiled for national emergencies, leaving aviation and shipping exposed. Japan is releasing 20 days of oil reserves in May, and India’s largest private refiner has begun capping fuel sales, with accelerating drawdowns raising the risk of demand destruction if the standoff persists, Bloomberg reports.
  • Wildfire surcharges now account for nearly 20 percent of the average Pacific Gas & Electric (PGC) bill, with Southern California Edison (EIX) and San Diego Gas & Electric parent Sempra (SRE) carrying similar embedded costs of 17 percent and 14 percent respectively, as California residential rates have already risen 37 percent since 2020. A new California Earthquake Authority report warns that without systemic reform, escalating wildfire liability will keep pushing utility bills higher, threatening the state’s electrification goals and destabilizing its insurance and mortgage markets, Bloomberg reports.

Bitcoin and Digital Assets

Strengths

  • Bullish sentiment appears to be returning to Bitcoin, with the $80,000 call option now the most popular trade on Deribit, the world’s largest crypto options exchange. Open interest at that strike has risen to more than $1.6 billion, overtaking the previously dominant $60,000 downside put, suggesting traders are shifting from a defensive stance to a more optimistic one. Bitcoin has also rebounded above $70,000, supported by easing geopolitical tensions and a macro backdrop that could turn more favorable for risk assets if lower oil prices revive expectations for Federal Reserve rate cuts.

  • Crypto’s institutional foundation continues to strengthen as Galaxy Digital, led by Mike Novogratz, highlighted its first annual report as a Nasdaq-listed company. The firm emphasized the growing convergence between crypto, AI, and digital infrastructure, with its Helios data center campus in West Texas now valued at over $15 billion and backed by 1.6 gigawatts of approved power capacity. Galaxy also reported approximately $12.3 billion in platform assets as of year-end 2025, underscoring how major crypto-native firms are evolving into diversified financial and infrastructure businesses.
  • Tokenized trading of traditional assets is gaining traction, with weekly volumes in perpetual swaps tied to commodities and equities reaching $30.7 billion, according to BitMEX. The surge has been driven by macro volatility, with oil-linked contracts hitting $6.9 billion in weekly volume amid geopolitical tensions, while equity-based perpetuals jumped over 900% to $4.9 billion. By enabling 24/7 trading with no expiry, these instruments are expanding crypto’s role beyond digital assets into global financial markets and increasing the industry’s total addressable market.

Weaknesses

  • Institutional demand still looks fragile, as U.S. spot Bitcoin ETFs posted about $93.9 million in net outflows on Wednesday, even as Bitcoin climbed from roughly $67,800 to nearly $71,000. Although BlackRock’s IBIT saw $40.4 million in inflows and Morgan Stanley’s new MSBT added $30.6 million on its first day, those gains were more than offset by outflows from Fidelity’s FBTC (-$79 million), ARKB (-$74.7 million), and Grayscale’s GBTC (-$11 million), suggesting investors are still using strength to reduce exposure rather than add to it.
  • Institutional demand in Bitcoin derivatives has also weakened, with activity on CME Group, a key venue for institutional Bitcoin futures, falling to a 14-month low. Average daily open interest dropped to around $7.2 billion in early April, while monthly trading volume fell to $163 billion in March, nearly 50% below its January peak. The decline appears linked to unwinding of the basis trade, suggesting that a key source of earlier price support is fading.
  • Even as tokenized commodities gain traction, adoption still faces key structural challenges. According to Binance Research, tokenized silver trading rose to nearly 15% of Comex silver futures volume in March and April, up from just 1.37% in January, while tokenized gold perpetuals surpassed the futures volume of some regional exchanges, reaching 401% of TOCOM in Japan. However, issues around pricing, liquidity, and investor trust continue to limit broader adoption, indicating the market remains early in its development.

Opportunities

  • Stablecoins continue to emerge as one of crypto’s most compelling long-term growth opportunities, with Chainalysis projecting adjusted transaction volumes could reach $719 trillion by 2035. The firm noted stablecoins already moved more than $35 trillion last year, but only about 1% was tied to real-world payments, highlighting significant room for expansion. As younger, crypto-native generations inherit an estimated $100 trillion in wealth, stablecoins could increasingly challenge legacy payment rails like Visa and Mastercard through faster, lower-cost, always-on settlement.
  • Crypto platforms continue to expand into new financial verticals, as Binance integrated prediction markets into its wallet, allowing users to trade on real-world events directly within the app. The feature lowers barriers to entry by covering gas fees and enabling seamless access using existing balances. Prediction markets have surged from under $100 million to over $20 billion in monthly trading volume in two years, highlighting rapid growth in the space.
  • Stablecoins are gaining real-world traction in emerging markets, with a Borderless report showing FX usage in parts of Latin America and East Africa now approaching institutional-grade pricing. In LATAM, stablecoin FX traded within ~22 bps of interbank rates, while execution costs in Brazil reached zero across multiple providers, underscoring growing efficiency in cross-border payments.

Threats

  • Geopolitical risks tied to crypto are becoming more visible, as reports suggest Iran is increasingly using Bitcoin and stablecoins to facilitate oil trade and charge transit tolls through the Strait of Hormuz, a key route for roughly 20% of global oil flows. According to Chainalysis, these transactions are part of a broader sanctions-evasion network, with some flows tied to more than $178 million in activity and affiliated networks approaching $1 billion. The case underscores how crypto’s role in cross-border trade could face growing regulatory scrutiny and reputational pressure, particularly if sanctioned actors expand use of dollar-linked stablecoins.
  • Regulatory pressure on stablecoins is rising as the U.S. Treasury proposed new rules requiring issuers to monitor, block, freeze, and reject suspicious transactions, effectively aligning them more closely with traditional financial institutions. The proposal, developed by FinCEN and OFAC, would require stronger compliance controls under the GENIUS Act, set for full implementation by 2027. While the framework could support legitimacy, it also raises compliance costs and regulatory burdens for issuers at scale.
  • Sovereign Bitcoin selling remains a potential overhang, as Bhutan moved another 319 BTC (about $22.7 million), extending a months-long reduction in holdings. According to Arkham Intelligence, the country has transferred more than 9,000 BTC since late October 2024, cutting its stash from around 13,000 BTC to 3,654 BTC, a decline of roughly 70%. While Bhutan remains one of the largest publicly tracked sovereign holders, continued selling highlights the impact of government-linked supply on the market.

Defense and Cybersecurity

Strengths

  • Nebius Group is in talks to acquire AI21 Labs, a move that could strengthen its AI cloud ecosystem after Nvidia exited earlier discussions. The deal would add proven AI products like the Maestro agent platform, supporting Nebius’ push into higher‑value, enterprise AI solutions.

  • The U.S. Space Force’s Andromeda program has awarded approximately $1.8 billion in contracts to 14 companies, including BAE Systems, L3Harris, and Northrop, to develop space-based systems for tracking and monitoring objects in orbit through 2036, signaling significant long-term demand for space surveillance capabilities.
  • Meta has secured a significant $21 billion AI cloud deal with CoreWeave for next-generation chips, and TCS’s AI services revenue has surpassed $2.3 billion, reflecting strong momentum and strategic positioning in AI infrastructure.

Weaknesses

  • On April 8–9, 2026, CISA and Infosecurity Magazine reported that Iranian APT groups targeted U.S. critical infrastructure providers via internet-exposed OT and ICS systems, causing operational disruptions and financial losses. The incidents highlight how automated and AI-assisted reconnaissance is increasing the scale and effectiveness of attacks on defense and industrial supply chains.
  • DroneShield shares plunged yesterday after the company announced that longtime CEO Oleg Vornik and Chairman Peter James would step down, reigniting investor concerns over governance following last year’s controversial insider share sales. Despite strong revenue growth, the sudden leadership reset reinforced fears about trust and stability, triggering a sharp sell-off.
  • Iran’s Islamic Revolutionary Guard Corps launched cyber and other strikes on U.S.-linked tech and defense firms in the Middle East, explicitly including Palantir, targeting a total of 18 companies and issuing warnings to employees and nearby residents.

Opportunities

  • The U.S. Space Force and the Pentagon are evaluating the Commercial Augmentation Space Reserve (CASR) concept, which could increase strategic reliance on commercial networks by allocating satellite capacity for military use during crises.
  • U.S. President Donald Trump has asked lawmakers to approve a $1.5 trillion defense budget for 2027, as the U.S. faces rising costs from its war with Iran and mounting global security commitments. The proposal would increase Pentagon spending by more than 40 percent in a single year—the sharpest rise since World War II—as Washington seeks to sustain military operations and rebuild depleted weapons stockpiles.
  • A Ukrainian firm, Fire Point, has begun early-stage efforts to develop a new air defense solution it describes as a low-cost alternative to the American Patriot system, potentially reducing the cost of intercepting ballistic missiles to well below $1 million.

Threats

  • On April 7, 2026, researchers disclosed that Russia-linked APT28 compromised over 18,000 internet routers, exploiting outdated hardware to steal Microsoft access tokens without deploying malware. The campaign underscores systemic risks from legacy network infrastructure used by government agencies, defense contractors, and critical infrastructure operators.
  • The U.S. has deployed nearly its entire JASSM-ER inventory in operations against Iran, depleting reserves and highlighting the need for accelerated replenishment, which benefits Boeing and its missile defense peers.
  • Iran-linked hacker groups have claimed to have stolen up to 375 TB of Lockheed Martin data and threatened to sell it online, but U.S. cybersecurity firms and Lockheed itself say the claims remain unverified and no breach of classified systems has been confirmed. While the alleged data haul is unproven, separate verified incidents involving the doxxing of Lockheed personnel underscore the growing cyber and information warfare risks facing major U.S. defense contractors.

Gold Market

This week gold futures closed the week at $4,811.00, up $131.30 per ounce, or 2.81%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 5.44%. The S&P/TSX Venture Index came up 2.11%. The U.S. Trade-Weighted Dollar fell 1.47%.

Strengths

  • The best-performing precious metal for the week was silver, up 5.38%, about twice the price gain of gold. China bought 160K ounces of gold in March, the largest amount since February 2025 and as much as it purchased in total over the past five months. The country’s total holdings now stand at 74.38M ounces and are worth almost $350B at current gold prices, according to Canaccord.
  • According to Scotia, at $4,700/ounce gold, the weighted average ROIC for gold companies for 2026, 2027, and 2028 is 24.9%, 21.9%, and 19.7%, respectively. This compares with 18.9% in 2025, while historical weighted averages over 3, 5, 10, and 15 years are 11.5%, 9.8%, 7.6%, and 7.3%, respectively.
  • G Mining Ventures Corp. agreed to acquire G2 Goldfields in a roughly C$3B deal that combines adjacent gold projects in Guyana. G2 shareholders will receive 0.212 GMIN shares plus a stake in a newly created explorer, G3 SpinCo, which will be funded with C$45M in cash and potential contingent value payments of up to $200M. G2 Goldfields’ share price jumped 79% on the takeover announcement.

Weaknesses

  • The worst-performing precious metals for the week were gold and palladium, still up 2.81% and 2.46%, respectively. UBS has seen a 9% reduction in ETF holdings since the onset of the Middle East conflict, driven primarily by U.S. liquidations, with global platinum outflows of 228K ounces over the same period.
  • First Majestic Silver traded down almost 6% for the week when the average gold stock was up nearly 5%. First Majestic Silver reported quarterly gold and silver production that largely beat estimates; however, year-over-year gold and silver production was down 5.8% and 5.1%, respectively.
  • Waning output at North America’s top gold producers is helping mining rivals in other regions catch up in the latest global rankings for annual bullion production. Newmont Corp., Agnico Eagle Mines Ltd., and Barrick Mining Corp. all reported lower gold production in 2025 compared with the prior year, and all three North American companies expect output to decline further this year. Meanwhile, global peers including China’s Zijin Mining Group Co., Africa-focused AngloGold Ashanti Plc, and Uzbekistan’s Navoi Mining & Metallurgical Co. saw production increase, according to the latest financial disclosures.

Opportunities

  • The recent pullback in gold equity prices may trigger more acquisitions. Junior exploration and development stocks experienced the largest share price declines in March relative to their intermediate and senior peers, and this may act as a near-term catalyst. G Mining Ventures’ opportunistic purchase of G2 Goldfields highlights the opportunity to acquire assets after political crises that disproportionately pressure equity valuations.
  • JP Morgan found that gold miners typically rally 80% over six months after gold prices bottom following market shocks. Historically, after gold fell 25% during the financial crisis, miners surged more than 50%. Gold’s 9% drop during COVID was followed by a more than 100% rally in GDX. In 2022, after gold fell 14% at the start of the Russia-Ukraine conflict, GDX rose 50%.
  • Despite gold’s nearly 10% pullback from its January record amid Middle East–driven volatility, major banks remain constructive on the long-term outlook. Goldman Sachs reiterated its $5,400/oz forecast, citing continued central bank buying and expectations for 50 bps of Fed rate cuts this year. Analysts added that while near-term downside risks persist if disruptions in the Strait of Hormuz continue, a prolonged conflict could accelerate diversification away from traditional Western assets, supporting prices in the longer term, according to Bloomberg.

Threats

  • U.S. federal debt surpassed $39 trillion, just 147 days after passing $38 trillion. In February, the Congressional Budget Office (CBO) released its latest economic outlook, projecting a deficit of $1.85 trillion (5.8% of GDP) for 2026, prior to the escalation of conflict involving Iran. The Trump administration has proposed increasing the US War Department’s budget by 40% to $1.5 trillion for FY27. The CBO outlook forecasts the deficit rising to $3.1 trillion over the next decade and federal debt increasing to $64 trillion.
  • The Banque de France has officially ended the presence of its gold reserves in the United States, withdrawing the last 129 tons of precious metal previously held in the vaults of the Federal Reserve Bank of New York. In a report published last week, the central bank stated that the withdrawn amount represents 5% of its total sovereign gold reserves, noting that the process took place between July 2025 and January 2026, according to Bloomberg.
  • Goldman Sachs recently outlined cost sensitivities to rising diesel prices across its Australian gold coverage, and now incorporates near-term cost increases into its base case, with operating costs sitting 15% above consensus in FY27. Should elevated diesel prices continue through the June quarter, they see A$20–100/oz of upside risk to FY26 AISC guidance across coverage, and a A$100–400/oz full-year impact if price pressures persist into FY27.

Related: Energy Shock Hits Aviation Hard, but Industry Outlook Isn’t Breaking