Geopolitical turmoil in the Middle East, sparked by U.S. and Israeli strikes on Iran, is fueling global defense demand and raising expectations for expanded orders at Korean defense companies. Interest in "cost-effective weapons" has grown through the U.S.-Iran conflict, highlighting the strengths of Korea's defense industry. Analysts forecast that operating profit at Korea's four major defense firms could surge to as high as 7 trillion won.
According to financial data provider FnGuide on April 8, the combined operating profit consensus for Hanwha Aerospace (012450.KS), Hyundai Rotem (064350.KS), LIG Nex1, and Korea Aerospace Industries (047810.KS) stands at 6.5 trillion won this year, a 41 percent increase from 4.6 trillion won last year. The combined highest estimates from securities firms reach 7.4 trillion won. The four companies, which first achieved combined revenue of 40 trillion won last year, have a revenue consensus of 48.1 trillion won this year, with highest estimates putting the 50 trillion won mark within reach.
Market analysts are lending weight to forecasts that domestic defense firms could achieve record earnings as geopolitical risks become permanent fixtures, including the prolonged Russia-Ukraine war, the U.S.-Iran conflict, and tensions in the Taiwan Strait.
K-defense, with its competitive pricing, fast delivery, and combat-proven performance, is emerging as a key alternative not only in the Middle East but also in Europe and Latin America. The New York Times recently reported that "the Iran war proved the potential of Korean defense," noting that "Korean weapons systems are cheaper than American ones, delivered much faster, and perform excellently."
The Financial Times also identified "the rise of low-cost, high-efficiency weapons systems" as a characteristic of the Middle East conflict, introducing LIG Nex1 as a key beneficiary. LIG Nex1's medium-range surface-to-air missile Cheongung-II is priced at about one-quarter of the U.S. Patriot (PAC-3) while boasting comparable accuracy. During the Middle East conflict, Cheongung-II demonstrated its combat performance by intercepting 29 of 30 missiles and drones that Iran fired toward the United Arab Emirates.
The government and defense companies are actively pursuing overseas markets. KOTRA is operating the largest-ever Korean pavilion with 31 defense companies at FIDAE 2026, Latin America's largest aerospace and defense exhibition, at Santiago Airport in Chile.
Latin America, where average ages of major weapons systems reach up to 45 years, has significant military modernization demand. The defense industry expects to break $20 billion in exports this year through market diversification including this region. K-defense has already jointly built warships and patrol vessels in Peru, and has achieved anti-ship missile and missile launch system exports to Colombia. Tactical vehicles and anti-drone systems are also under discussion for Latin America.
DB Investment & Securities raised its export expectation for this year to $37.7 billion (approximately 56.6 trillion won), citing defense budget increases from European rearmament and market share expansion in the Middle East taking full effect this year.
Defense export contracts have continued this year. Hanwha Aerospace signed an additional 2.4 trillion won contract with Poland on April 1, following the 4.6 trillion won third execution contract for Chunmoo guided missiles in December last year. In February, the company also secured a 1.3 trillion won contract with Norway for Chunmoo multiple launch rocket systems.
KAI signed a 101.4 billion won FA-50PH Performance-Based Logistics (PBL) contract with the Philippines. With a Canadian patrol submarine project underway and exports of the Korean fighter KF-21 being pursued, the expansion of K-defense orders is expected to continue for the time being.