By Matt Stoller, Substack, 3/1/26

…But the big story is of course the war in the Middle East launched on Saturday morning. And while war often seems distinct from the question of political economy, in this case the two are intrinsically linked.

Let’s start with the contours of the conflict itself, which is the second attack on Iran since last June. In that first conflict, Israel killed many people in the regime, and weakened the country significantly. But it was a largely choreographed response, with Iran sending a barrage of rockets repelled by defenses across the Middle East, and then the whole thing ended with a cease fire. Oil prices didn’t much move, and neither did stocks.

This time, it could be different. So far, the U.S. and Israeli forces used air power to kill much of Iran’s leadership. The Iranians haven’t hit back with major missile barrage, but are using a “drip attack,” which is to say, firing small barrages of rockets and drones across Middle Eastern nations, from Israel to Bahrain to Iraq to Kuwait to Saudi Arabia to Jordan to the UAE. They have hit some military bases, but are aiming mostly at soft civilian targets and energy infrastructure, and even data centers. Israelis are in bomb shelters, and some U.S. bases have been hit. Three U.S. solders so far are dead.

It’s not clear whether the Iranian approach is a result of weakness, the lack of a military command, or some sort of strategy. It’s possible their regime will falter, since it is domestically unpopular. Or they could be seeking to get their opponents to waste missile defense assets, and scaring Arab allies into pressing Trump for a cease fire.

But Iran’s bad position doesn’t mean the situation is great for the U.S. and its allies. After the first day, which seemed to be a shocking win for the U.S. and Israel, some sort of fear or exhaustion has set in. The U.S. has used up years of production of high-tech weapons and may run out, while also testing cheap drone technology that it ironically copied from Iran. There is now panic across the wealthy cities of the Middle East, as the airports are closed and the luxury hotels are under sporadic siege by drones and rockets.

It’s never clear what happens in war, so this fight could end tomorrow, or it could go on for weeks. Already Trump is indicating he’s open to negotiations, and the Iranians are making tentative noises to that effect as well. Oil seems to be spiking, which didn’t happen the first time, and there are indications that stocks could be affected. The war is also extremely weird, with the Iranian regime using Twitter to call the American regime a group of pedophiles, and potential civil unrest within Western-aligned Arab states.

So that’s the conflict, summarized by a non-military person reading the news and talking to random military sources. I thought an attack on Iran was a bad idea if for no other reason that Iran can shoot back. I guess we’ll see.

But something about the war did surprise me. When the U.S. launched the attack, I assumed that the decision was a result of some sort of combination of Donald Trump’s rashness, domestic hawk pressure and Israeli interests, all going against world opinion. But as it turns out, much of the elite Western and Middle Eastern world was pressing for this conflict or was fine with it once it started. Rachel Maddow, not exactly a dove, pointed fingers at “the Gulf Arab states who want Iran removed as their regional rival.” Unsurprisingly, both the Israelis and the Saudis lobbied for the war. But when Trump went ahead, he got support from Canada’s Prime Minister Mark Carney, as well as Germany and France and much of the Arab world.

And this support isn’t trivial, the French are sending a strike group to the region. The GOP and national security establishment is mostly satisfied, and half of the Democratic Party took the attitude of California Governor Gavin Newsom, which is to say they are happy for the war, but wish they had been given a heads-up first.

In other words, Trump, far from a unilateralist, is operating within an orthodox foreign policy consensus about the need to topple the Iranian regime. And I found that puzzling. Ten years ago, I worked in the Senate, and I used to ask around about the obsession with Iran. And every foreign policy staffer, no matter how lefty, would say the same thing. “You can’t trust the Iranian regime.” And I would always ask why? The answer, repeated, was “You can’t trust the Iranian regime.” There are many regimes you can’t trust, I would observe, the Saudi government was involved in 9/11. So why is this one so bad? The response was just, “You can’t trust the Iranian regime.” And I could never get a real answer.

There are many theories about this obsession; the Iranians embarrassed the U.S. in the 1970s, and some hawks in America have always wanted to destroy the regime. Israelis are vying for influence with Iranians, and AIPAC gives a lot of money to U.S. politicians. It’s about oil. Neocons have influence in both parties. True, and true. But the bigger dynamic here is bureaucratic.

I’ve long noticed the endless parade of investors heading over to Saudi Arabia, the UAE, and Qatar, getting investments for everything from banking to artificial intelligence. Elon Musk secured money from the Saudis for his AI venture and his takeover of Twitter, Sam Altman sought billions from Abu Dhabi, Anthropic went after money from UAE and Qatar. And JP Morgan, Goldman, Morgan Stanley, Blackrock and Citigroup are competing heavily in the region.

And this trend is not new. In the 1970s, newly wealthy oil princes suddenly found themselves with over four hundred billion dollars, and had to put it somewhere. The deposited it in American banks, who then lent it all over the world, in what was known as “petrodollar recycling.” The corporate, banking, and oil prince worlds have only drawn closer and closer since. In the early 1980s, the merger boom unleashed by the Bork revolution started in the oil patch, and endless waves of mergers have been financed by Arab money. In the 2000s, on a political level, the Bush family linked Texas, the CIA, and the Saudis. In 2013, Al Gore sold his CurrentTV channel to the government of Qatar for $500 million. And in the shale revolution of the 2010s, Texas producers joined Saudi-led OPEC to keep oil prices high.

Today, the Middle East is full of investors in every major venture in the U.S., and most of our think tanks and diplomatic corps are part of that world. Arab elites are also part of the Western establishment. For instance, the giant video game company Electronic Arts was bought with Saudi money, in part because the Saudi prince, Mohammed bin Salman, is a gamer. He also brought the top U.S. comedians to his country for the Riyadh Comedy Festival last year.

The cultures are now so close that Saudi Ambassador Prince Bandar bin Sultan had a private jet painted with the Dallas Cowboys logo, as he was good friend with Cowboys owner Jerry Jones and loved American football. Indeed, while there’s a longstanding pretense of Arab antisemitism and dislike of Israel, it’s notable that both Arab and Israeli elites, including MBS and Israeli Prime Minister Ehud Barak, were extensively involved in the network of Jeff Epstein.

Ultimately, Western elites have dropped any pretense they care about human rights, and Arab elites have dropped any pretense they care about nationalism or Islam. It’s now one giant Davos blob. Here’s David Dayen making the point very clearly.

And indeed that’s true.

According to reports, the Paramount deal has been made possible in large part thanks to equity from Qatar, Abu Dhabi and Saudi Arabia. Middle East money is already flowing freely through global entertainment and media but many are wondering what strings will be attached to this latest and biggest U.S. media investment. These weren’t charity donations.

And that brings us to the collective distrust of Iran throughout all of these networks. Iranians aren’t part of the transnational Davos elite, and are always trying to annoy the people in it by expressing their desire for regional power. So the answer to why you can’t trust the Iranians is that they aren’t part of the club. They don’t paint Cowboys logo on their private jets, nor do they invest in private equity and AI companies, and they aren’t part of investment syndicates for Hollywood studios.

In other words, this attack on Iran isn’t a civilizational conflict, it’s anger from the Epstein class of elites towards a separate group of elites in Iran. Of course, the everyday people who live in these countries want nothing to do with these factional spats. The Americans who have to fight in this war, and the public that must finance it, are unhappy.

The split between elites and the public is vast, and growing. Wars rarely get more popular over time. And this attack may not be one of those conflicts of choice where the cost is mostly invisible to the U.S. It’s possible Iranian missiles and drones could cause meaningful damage to U.S. military assets. It’s possible they actually cause a downdraft or crash in the stock market, and harm the actual investors that called for this war. Or maybe it’s a blip, and Trump decides to declare victory and the Iranians assent to ending it. I don’t know. But the Epstein class, while wealthy and powerful, is greedy and short-sighted. And that means they take all sorts of immensely stupid risks, assuming someone else will always clean up any mess…

***

Missiles are Depleted but Defense Contractors are Cashing In

By Veronica Riccobene, The Lever, 3/5/26

In the weeks before launching strikes in Iran, the Trump administration had a problem: figuring out how to spend the $500 billion in extra Pentagon money the White House plans to request from Congress next year. Just two days later, the administration told Congress that in the next year alone, it plans to burn through $153 billion in additional military funding approved in 2025 — money Congress expected to be spent over five years.

Now, less than a week after the strikes, executives representing weapons manufacturers including RTX (formerly Raytheon) and Lockheed Martin are scheduled to meet with President Donald Trump to discuss the nation’s “diminishing” munitions stockpiles. 

While the president insists U.S. munitions reserves have “never been higher or better,” defense-industry funded consultants and lobbyists are warning that in less than a week, the U.S. has “burn[ed]” through its precision-guided long-range missile reserves. They argue that a shrinking industrial base and declining productivity could undermine U.S. military objectives in places like Ukraine and Israel. Of particular concern are the country’s stockpile of precision missile interceptors, a quarter of which were reportedly depleted in just 12 days of fighting between Israel and Iran last summer and are on track to be further drained in the Iran war.

Yet, since the 1990s, U.S. military spending has nearly doubled, exceeding the combined spending of the next nine largest militaries. 

So where has all that money gone? Into the pockets of top shareholders.

The weapons industry has become incredibly concentrated: Since the 1990s, the number of “prime” contractors working with the Defense Department has shrunk from 51 to five. And in recent years, these giants — propped up by trillions in taxpayer spending — have spent more enriching investors than in expanding production.

Between 2020 and 2025, top military contractors spent $110 billion on buybacks and dividends — more than double what they spent on capital expenditures. Those payouts disproportionately benefit the wealthiest Americans. The top 1 percent of earners control roughly half of all wealth invested in the stock market — including executives and board members who approve buybacks and dividends while enjoying lucrative stock-based compensation. 

It may be fortunate that those billions weren’t instead spent on war munitions designed to cause death and destruction. But much of this money ultimately came from American taxpayers, who are likely to end up footing the bill to replenish U.S. arsenals.

The four largest defense firms in the nation all heavily rely on federal contracts, meaning weapons-industry investors are indirectly lining their pockets with taxpayer dollars. According to the government contract tracker TenderAlpha, in 2024, Department of Defense contracts accounted for between 30 and 40 percent of Boeing and RTX’s revenue, 74 percent of Lockheed Martin’s, and a startling 98 percent of Booz Allen Hamilton’s. 

There are already indications that plenty more tax dollars could be flowing their way. The White House is reportedly planning to ask Congress for another $50 billion in military funding as soon as Friday, a proposal more likely to be approved now that Republicans have torpedoed Democrats’ lobbyist-compromised effort to limit the Iran war.

It’s no wonder that on the Monday following the Iran strikes, Pentagon suppliers saw immediate returns. Responsible Statescraft reports that Lockheed Martin (for which annual defense contracts rival the budget of the entire U.S. State Department) experienced a 3.4 percent stock jump; RTX rose 4.7 percent; and Northrop Grumman posted a 6 percent increase.

Morgan Stanley even issued an advisory this week recommending that investors “consider increasing exposure around themes like defense, security, aerospace and industrial resilience, where government spending can drive multiyear demand.”

The industry’s racket has become so extreme that earlier this year, President Donald Trump issued an executive order barring defense contractors from committing cash to buybacks and dividends if they fail to “produce a superior product, on time and on budget.” He even went so far as to threaten to cancel the federal contracts of RTX — which redistributed $57 billion to investors between 2015 and 2025 — until it ended stock buybacks and instead invested in manufacturing. 

“Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment,” the president wrote on Truth Social in January. “Executive Pay Packages in the Defense Industry are exorbitant and unjustifiable given how slowly these Companies are delivering vital Equipment to our Military, and our Allies.”

In response, firms including Lockheed Martin and L3Harris agreed to increase their capital expenditures by 38 percent from 2025 and pause buybacks — but have no plans to roll back quarterly dividends. And with bombs now falling on Tehran, these concerns seem likely to fall by the wayside.