Dipak Kurmi
The historical trajectory of human conflict reveals a chilling and often counterintuitive truth: while war inflicts extreme pain and systemic failure upon the masses, it simultaneously serves as a catalyst for the accumulation of super profits for a select tier of corporate and political victors. A recent research study has categorized this phenomenon as the "paradox of incentives," an analytical framework that examines why some firms emerge from the rubble with massive windfalls while others lie in absolute shambles. As the ongoing Iran war triggers the disintegration of most global asset classes, the spoils of this chaos are being divided along lines that are both predictable and deeply obscured. While the US dollar, treasury bonds, and energy commodities remain the traditional safe havens, the true beneficiaries of this conflagration include a complex web of defense giants, hidden tech titans, and opportunistic political leaders who find in the violence a convenient reprieve from domestic scrutiny.
In the immediate aftermath of the US-Israeli missile strikes on Iran, the financial markets provided a transparent ledger of who stands to gain from prolonged hostility. On Wall Street, defense stocks such as Lockheed Martin, Northrop Grumman, and RTX witnessed a surge of between four and six percent on the very first day of the strikes, representing a staggering shareholder gain of approximately $25 to $30 billion in a single trading session. This trend was mirrored globally; in Israel, Elbit Systems briefly ascended to the position of the country’s most valuable listed company, with its shares skyrocketing by 45 percent since the start of 2026. In Europe and the United Kingdom, defense equities surged even as the broader FTSE 100 index faltered, with BAE Systems gaining six percent on day one. These figures underscore a grim economic reality where the machinery of destruction functions as the most reliable engine of wealth creation during periods of geopolitical instability.
The Indian context offers a nuanced variation of this paradox, reflecting the country's strategic position as a non-combatant with a rapidly growing indigenous defense sector. Early March 2026 saw Indian defense stocks experience high volatility, initially surging by 13.5 percent due to escalating Middle Eastern tensions before undergoing a correction as institutional investors engaged in profit-booking. This behavior stems from the fact that Indian firms are not directly involved in the Iran-Israel-US theater, making immediate tangible benefits less certain than for their Western counterparts. However, historical precedents such as Operation Sindoor on May 7, 2025, and the brief India-Pakistan conflict of last year demonstrate that when the threat is direct, the market response is explosive. During Operation Sindoor, the Indian defense sector outperformed broader markets by nine times, with key stocks like HAL, BEL, and Cochin Shipyard adding Rs 1.18 lakh crore to investor wealth as some shares rose 72 percent within weeks, driven by the proven success of indigenous defense platforms.
A defining characteristic of modern warfare is the invisible dominance of technology, specifically artificial intelligence, which has ensured that tech billionaires remain insulated from the general decimation of global stock markets. Both the Western alliance and Iran rely heavily on AI-driven weapons, intelligent missiles, and advanced drone platforms to conduct long-distance strikes on high-value assets. This reliance explains why the Nasdaq has remained relatively resilient despite the surrounding economic turmoil. In contrast, the Indian tech sector has faced significant setbacks, largely because it appears unprepared for the looming AI onslaught that defines contemporary military and industrial competition. The divergence between those who own the algorithms of war and those who merely provide traditional services has never been more pronounced, creating a digital divide that determines which corporate entities survive the "paradox of incentives."
The energy landscape is also being radically reshaped, with global crude prices crossing the $100 mark for the second time and some analysts predicting a catastrophic climb toward $200 per barrel. While Gulf petrostates like Saudi Arabia and the UAE face real costs, their lower exposure to the Strait of Hormuz compared to Kuwait, Qatar, and Iraq provides them with a relative advantage. Russia, too, finds itself in a lucrative position as its oil now sells at a premium, finding legitimate and eager buyers in India and China as global supply chains tighten. The United States stands to benefit immensely as Europe pivots toward American energy output, repeating a pattern seen after the Russia-Ukraine war. Furthermore, the high price of oil suddenly makes expensive drilling operations, such as US shale gas extraction, highly lucrative once again, potentially stalling the global transition to renewable energy as nations prioritize immediate fossil fuel security and even revive mothballed coal-based plants.
Beyond the boardroom, the political beneficiaries of this chaos are finding the war to be an effective tool for domestic survival. History shows that conflict often bolsters incumbent politicians by providing a powerful distraction from scandal or economic failure. For instance, the collapse of web searches for the Epstein files within hours of the first Iranian strikes suggests how effectively military action can bury uncomfortable domestic narratives. In Iran itself, the war may inadvertently strengthen the existing power structures; years of Western sanctions have already allowed the Islamic Revolutionary Guard Corps (IRGC) to monopolize control over oil, engineering, telecom, and construction. In the aftermath of direct strikes, the IRGC is likely to expand its dominance over the economy, framing its grip as a necessity for national survival against external aggression.
The social consequences of this conflict are perhaps the most unpredictable element of the emerging global picture. While initial strikes on Tehran saw pockets of elation among segments of the population following the death of the supreme religious leader, the subsequent transition of power to his son has triggered a surprising shift in regional dynamics. For the first time in nearly 1,500 years, there are signs of an informal unification between Shia and Sunni factions across the Muslim world, driven by a shared opposition to Western military intervention. This unexpected solidarity threatens to decimate the carefully hatched war plans of Western leaders, who had banked on deep-seated sectarian divisions to weaken the Iranian response. This shifting social fabric complicates the "paradox of incentives" further, as the geopolitical actors best positioned to end the violence may find that their own continued relevance and profit depend entirely on the perpetuation of the struggle.
Ultimately, the paradox of incentives ensures that the current Middle Eastern crisis remains extraordinarily difficult to resolve. When the primary stakeholders in a conflict—from defense contractors and oil giants to embattled political leaders—realize that the continuation of violence serves their strategic and financial interests more effectively than peace ever could, the incentive to de-escalate vanishes. This cycle of "windfalls and shambles" creates a feedback loop where the spoils of war are used to fund the next round of aggression, ensuring that the corporate victors continue to earn super profits while the rest of the world remains mired in the extreme pain of economic and social disintegration. The true tragedy of the paradox lies in the fact that those with the power to silence the guns are often the very ones who profit most from every shot fired.
(The writer can be reached at dipakkurmiglpltd@gmail.com)
