Donald Trump has a habit of sharing his most intriguing thoughts in the early hours. The 79-year-old US president recently took to Truth Social at 5am to discuss warships and lasers, alongside plans for his upcoming 80th birthday celebrations. One post featured an image of an American battleship using a laser beam to take down a plane marked with an Iranian flag, accompanied by the caption: 'Lasers: Bing, Bing, GONE!!!' The message, if any, appears to be a display of American military prowess — a kind of advertorial for US hardware.
War as a Growth Industry
War once destroyed markets; now it seems to power them. It is a lucrative time to be a weapons contractor. BAE Systems, Britain's leading defence firm, has announced it will meet growth expectations thanks to 'increased defence spending across all our key markets'. An investment of £100 in BAE five years ago would now be worth over £400, excluding dividends, which have been generous. War, it appears, can be good for business.
Similarly, Shell has posted profits exceeding £5bn, buoyed by the impact of Trump's war in Iran on oil prices. Brent crude briefly dipped below $100 a barrel on Thursday but quickly returned to triple figures. The commodity has been closely tied to the US president's actions since he ordered bombers into Iran, with the perverse outcome that the Iranian regime may emerge stronger than before.
The Death of the Peace Dividend
The post-Cold War peace dividend — the reallocation of funds from defence to domestic spending — has long been dead. Trump's conflict and Vladimir Putin's relentless campaign in Ukraine, despite damage to Russia's economy and youth, are trampling on its remains. This raises the question: is the resurgence of battle capitalism the ultimate victory of the military-industrial complex, a term popularised during the Reagan era?
Oil plays a crucial role in this dynamic. It fuels the complex, whose equipment is often used to secure oil assets. Since the Vietnam War, oil has been a primary or secondary cause of many global conflicts. Ironically, it was Republican President Dwight D. Eisenhower who coined the term 'military-industrial complex' in his farewell address, warning against its unwarranted influence. Eisenhower, a decorated Second World War commander, was no pacifist, but his warning went unheeded by successors John F. Kennedy and Lyndon B. Johnson. US defence expenditure peaked at 9.4% of GDP in 1967 during the Vietnam War.
Defence Spending Trends
After declining in the 1970s despite the Cold War, defence spending rose sharply under Ronald Reagan before falling again. Over the past decade, it has stabilised at 3.3–3.4% of GDP, according to World Bank data — still far above most European nations. Trump has a point in criticising Europe for underinvestment in defence. The UK's spending followed a similar trajectory, peaking at 7.1% of GDP in 1960, then falling to a low of 1.9% in 2018 before rising to 2.3% in 2023. Prime Minister Keir Starmer has pledged to reach 3%. Ironically, peace in the Middle East would be the biggest boost to UK defence exports.
With rearmament on the agenda across Europe and beyond, the defence industry, including BAE, is well-positioned. This marks a win for the military-industrial complex.
Oil and the Green Transition
As for oil, both BP and Shell have cooled on the green-energy transition, while US oil majors never fully embraced it. They all anticipate sustained demand for their products, keeping investors happy. This battle-resource capitalism could become a key investment theme of the next decade, as defence spending rises and competition for resources keeps oil prices high. People may profit handsomely — perhaps they should invest the proceeds in preparedness. It is not a cheerful thought, but in a boom time for weapons contractors, it is a prudent one.
