Jefferies: Iran Implications for Defense & Airlines

Jefferies: Iran Implications for Defense & Airlines

The analyst comments "World Reaction. The world has started to react with the UK government saying it does not want to see a "a wider regional conflict" in the Middle East and as it understood the UK was not involved. UAE said in a statement that the country has been subjected to a "blatant attack involving Iranian ballistic missiles" with its air defense systems intercepting a number of missiles while condemning the attack a "dangerous escalation" and "cowardly act". The UAE hosts a major US Air base, Al Dhafra Air Base, and is a key regional hub for the US. Mid East Accts for 22% of FMS In 2020-2025 - Implications for US Defense. The strikes or at least the scope of the strikes reinforce the buildup of US Defense Spending ($1TT in 2026) and key initiatives such as Golden Dome (domestic missile shield) and the restocking and ramping of missiles and defensive interceptors (see RTX, PAC-3, THAAD agreements). It also highlights Israel as a key ally supported by the US defense industrial base, including for the most advanced technologies with the F-35 (LMT) and F-15 (BA). Since 2013, FMS notifications to Israel have totaled $56BB (Ex 1), led by BA for the F-15 and KC-46, along with munitions (Ex 2) and AH-64E (BA/LMT) this year. ME accts for $20BB of $26.6BB total FMS in 2026 (75%) w/ $6.7BB to Israel vs 22% avg from '20-'25 (Ex 3). Airline Oil Implications. Brent and WTI are both up 3% on Saturday AM, and we note our Airlines coverage (AAL, AC CA, DAL, LUV, UAL) historically has reacted negatively to sharp spikes in oil. Each 5% change in our '26 avg fuel/gal est is worth ~5-10% to EPS at DAL (est $7.10) and UAL (est $13.65), and ~35% to AAL (est $1.95)."

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