Iran war rearmament cycle

Moved from 2.1.2 0.87 ± 0.04 to 0.86 ± 0.04 - small -0.01 step netting Monday's two opposing flows. Positive side: defense primes all rallied 1.7-2.8% on the cash session in direct confirmation of the procurement-cycle reading (LMT +2.38%, RTX +2.78%, NOC +1.72%). Offsetting side: Trump called off Tuesday strikes at Gulf-allies' request and the US negotiation text reportedly accepts Iran oil sanctions waiver during negotiation period - both tactical near- term de-escalation. Width held at 0.04; the structural argument (multi-year procurement post-Operation Epic Fury) is unchanged. Beta(29, 4.7) encodes ~34 effective observations - slight beta increase reflects the tactical-de-escalation weighing-against component without breaking the structural reading.

The US-Iran war that began Feb 28 2026 (Operation Epic Fury) triggered a multi-year defense spending cycle that benefits prime contractors with missile and missile-defense exposure regardless of diplomatic-track outcomes. Defense primes rallied materially on the Monday May 18 cash session in confirmation of the procurement-cycle reading - LMT closed 528.31 (+2.38%), RTX 175.95 (+2.78%), NOC 550.00 (+1.72%). The Monday-morning escalation peak (Sunday Barakah drone strike on the UAE's nuclear plant, Trump "clock is ticking" Truth Social posts, 14-point Iran proposal via Pakistani mediators) partially reversed by Monday evening: Trump called off Tuesday strikes on Iran at the request of Qatar, Saudi Arabia, and UAE leaders who reported "serious negotiations underway with Iran that will result in a deal acceptable to the U.S."; the US negotiation text reportedly waives Iranian oil sanctions during the negotiation period. Iran's 14-point proposal substance now public: 30-day war end, US-forces withdrawal, naval-blockade end, asset unfreezing, reparations, sanctions lift, end-of-fighting in Lebanon, new Hormuz mechanism; Trump called it "not acceptable." UAE response to Barakah condemned the attack as "dangerous escalation" but notably did NOT name Iran directly, reserving the right to respond. Depleted munitions stockpiles (438 Iranian ballistic missiles, 2,012 drones, 19 cruise missiles fired at UAE through April 1) and Golden Dome ($185B) are committed multi-year programs that survive any near-term deal scenario. Monday price action is the structural confirmation; the tactical de-escalation flow is a partial near-term offset that does not bend the multi-year procurement cycle.