FORECASTS FOR EXECUTIVES AND INVESTORS
Reported from Washington, D.C. • kiplinger.com • Vol. 103, No. 18

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Washington, April 23, 2026

Dear Client:

The Iran war has reinforced a new fact of life:

The importance of drones in modern warfare. They’ve helped Tehran hold out against Washington and allowed Ukraine to hold its own against Russia.

The Pentagon is now trying to play catch-up as the U.S. prepares for a possible great-power conflict.

DRONES

Consider this simple cost comparison. Iran has forced the U.S. to use Patriot missiles ($4 million each) and THAAD interceptors ($12 million) to fend off swarms of $20,000-$50,000 Shahed drones, unsustainable in a longer conflict, especially with a foe as capable as China. Other recent battlefield successes for the tech include Ukraine forcing Russian soldiers to surrender using only unmanned drones and robots.

America lacks a robust drone industrial base compared with China, which accounts for roughly 90% of commercial drone production and controls most of the critical component supply chains. China’s DJI can make millions of reconnaissance drones per year. Skydio, the leading American drone manufacturer, can make thousands that cost three times as much. Note that Beijing is also catching up with the U.S. on more sophisticated drone technology used for both long-range strikes and spying.

Two noteworthy drone success stories: Ukraine and Taiwan. The former can produce 4.5 million drones per year, up from 5,000 in 2022, and deploy 9,000 of them per day in its fight against Russia. The latter is also ramping up output and exports, with the goal of increasing its production capacity to 180,000 units per year. Both countries have also managed to build China-free drone supply chains.

In response, Washington has launched its own Drone Dominance Program, a $1.1 billion effort with the goal of equipping the U.S. with hundreds of thousands of low-cost, weaponized drones by 2027. The Pentagon has purchased 30,000 so far after an initial competition involving 25 companies in Feb., ranging from start-ups to larger defense contractors like Kratos SRE and Neros. The agency is looking to buy at least 300,000 next year and start integrating them into U.S. battle plans.

More challenging than the drones will be building a reliable supply chain. The U.S. either relies on imports for key inputs, like sintered magnets (90% of which are made in China), or would struggle to scale up output at current domestic capacity. Case in point, the “brains” and “eyes” of drones depend on specialized semiconductors, like gallium-nitride power amplifiers, made at only a handful of Western facilities. The U.S. has taken some steps to address these issues but still has a long way to go.

Don’t be surprised if Washington gets by with a little help from its friends. General Cherry, one of Ukraine’s largest drone manufacturers, recently struck a deal to build its products in the N.H. factories of U.S. defense contractor Wilcox Industries.

FEDERAL RESERVE

President Trump’s pick to head the Federal Reserve is in political limbo.

Sen. Thom Tillis (R-NC) continues to block Kevin Warsh’s nomination. Tillis, who wields a deciding vote on the Senate Banking Com., says he won’t budge until the Justice Dept. drops its investigation of current Fed Chair Jay Powell. The months-long standoff comes as Powell’s term as chair expires on May 15.

Justice has shown no signs of ending its probe of Powell, who Trump says made misstatements to Congress about renovations to the Fed’s headquarters. Tillis counters that the probe is a political ploy by Trump to force Powell to resign, and that the president’s action is a threat to the central bank’s independence.

If Warsh isn’t confirmed by the deadline, Powell can stay on as acting chair until a replacement is in place. Trump says he’ll fire Powell if he stays past May 15.

A deal between Trump and Tillis is a possibility. But with the senator retiring from the chamber in Jan., he has little incentive to placate the president.

Whenever Warsh does get confirmed, he may find that his hands are tied.

He has signaled a desire to cut interest rates, but inflation may not let him. Warsh has said that he thinks productivity gains enabled by artificial intelligence will bring inflation under control in the long run, and he may well end up correct. But that’s an uncertain bet at best. Meanwhile, inflation continues to run higher than the Fed’s 2% target, and has done so for six years now. Warsh will struggle to convince his colleagues at the Fed who also get a vote on rates that it’s now safe to lower interest rates. Ditto, the bond market, where long-term yields have risen since the Fed first began its rate-cutting cycle in the fall of 2024. Actual evidence of inflation coming under control is going to be needed before Warsh can cut further.

TRUCKING

One cost that won’t ease much in the near future: Trucking. Diesel prices are edging down in the wake of crude oil’s fall from its peak, but slowly, and from near-record highs. Even if oil prices continue to come down, diesel will be slow to follow, given how tight supplies have become with the loss of Middle Eastern supplies. And even before diesel jumped in March, trucking rates had risen quite a bit this year: Up 30¢ a mile for spot dry van rates. 25¢ for spot refrigerated rates. Flatbed, up 70¢.

CARS

If you’re in the market for a used car, you might want to hold off for now.

Prices should come down later in the year. Wholesalers who were expecting that larger tax refunds would lead to strong demand for used cars bid up prices this winter. Sales of used cars did rise a bit, but the smaller-than-expected refunds and the 6.4% rise in used-vehicle prices ended up dampening demand this spring. Slackening sales going forward should bring prices back to earth a bit by year-end.

This advice goes double for used EVs, whose prices are up 8% this spring, partly due to the jump in gas prices leading some buyers to consider going electric. It’s unlikely gas prices will stay high enough for long enough to cause a major shift in demand toward EVs. Plus, an increasing number of EVs will be coming off lease in the coming months and returning to the used market, giving buyers more leverage.

Prices of used hybrids figure to stay strong. The familiarity of running on gas but with greatly increased fuel efficiency continues to win over more car shoppers.

INDUSTRY

U.S. helium exports are on the rise as a result of the ongoing Iran war, which has taken a third of the gas’s global supply offline. Shipments from the U.S. (which accounts for 40% of global helium output) to Taiwan have risen in recent weeks. Helium is critical to chipmaking and other high-tech applications.

Note that helium was just recovering from a series of prewar supply issues, including both outages and planned maintenance at facilities from the U.S. to Qatar to Russia. (Most of global helium output is a by-product of natural gas production.)

Companies set to benefit include Air Products and ExxonMobil. The latter has a facility in Wyo. that provides an estimated 20% of the world’s helium supply.

CONGRESS

While President Trump has sidelined Congress in waging war with Iran...

That could soon change. Although Republicans initially backed the war, there is growing frustration over the lack of congressional input. Many GOP lawmakers are now signaling a readiness to exercise their constitutional war powers authority.

A key deadline in the war is looming. Congressional GOPers have signaled that they view the war’s 60-day mark, which comes April 29, as the deadline for Trump to end the conflict or seek congressional approval. The scenario puts Republicans in a bind…vote to continue an unpopular war, or risk the wrath of the president?

The longer the war continues, the riskier it is politically for Republicans in a midterm election year. That may prompt some to vote for an end to the conflict.

IRAN

The U.S. and Iran remain stuck in a tense standoff over the Strait of Hormuz.

Washington hopes that its ongoing blockade will force Tehran to make a deal without additional military action, although more troops are on the way to the region. Tehran insists that the blockade be lifted before any more negotiations can take place.

Effectively implemented, the blockade can really hit Iran where it hurts by limiting its oil exports and eventually forcing the country to shutter production. Estimates on how long Tehran can hold out range from two weeks to two months.

The U.S. has time constraints of its own, as the midterm elections approach and Trump’s approval rating wanes. And if Iran has success running the blockade, it could force Trump to choose between greater compromise or military escalation.

TRAVEL

The Iran war is driving up airline costs, with consumers paying the price through new passenger fees and reduced services. Domestic airfares have increased slightly since the outbreak of the war. Fares for international flights have risen more, depending on the route, because of skyrocketing jet fuel prices.

Aside from airfares, U.S. airlines are adding fees and cutting corners. Nearly all major carriers have increased checked baggage fees, typically by about $10, or implemented fuel surcharges. Some airlines are stripping perks, like limiting access to airport lounges or restructuring fare tiers to restrict once-complimentary services. Airlines are also reducing domestic and international routes to save cash, as jet fuel prices have almost doubled since the Iran conflict began at the end of Feb.

Budget airlines are more vulnerable to the war’s effects than legacy carriers.

Price hikes remain relatively minimal for now due to high travel demand, though this likely will change if the conflict continues into the summer or beyond.

Don’t expect prewar fares and routes to return immediately at war’s end, as it may take months for jet fuel supplies and prices to return to normal levels.

CYBERSECURITY

Cyber fears over leading artificial intelligence have reached a boiling point.

Anthropic’s latest AI model is adept at finding and exploiting security flaws in widely trusted software. Anthropic is now working with major private companies and the federal government to test the unreleased AI and protect critical systems.

The issue isn’t entirely new. Businesses should focus on security basics: Regularly push software updates. Make sure only approved people can gain access to digital tools. Disable unnecessary app features, change default passwords, etc. Make sure security teams track and log IT data. Don’t reuse login credentials.

Note that AI systems that find vulnerabilities can improve security, too. Finding flaws quickly helps install updates rapidly and build more-secure code.

TECH & TELECOM

Note some major artificial intelligence trends that point to the tech’s future.

Adoption, revenue and capability for AI continue to rise, says a new report by Stanford Univ. Generative AI has been adopted by just over 50% of people and 88% of companies. The U.S. is also teeming with AI start-ups, with nearly 2,000, and saw $286 billion in private investment last year, 23 times more than China. Nvidia chips are dominant, but there’s competition. Nvidia accounts for over 60% of AI computation in data centers, but Google now has 18% and Amazon has 11%. China has largely closed the gap with the U.S. in AI performance of leading tools.

How much extra would you pay for satellite service direct to your phone?

That’s the $100 billion question satellite companies are asking these days, hoping that the nascent direct-to-device market adds up to tens of billions of dollars.

Satellite firms are making huge bets. SpaceX, the leader, says D2D service will compete with 5G cellular and has 15,000 more D2D satellites in the pipeline. Amazon is betting big on the market with its constellation. Others developing the tech: AST SpaceMobile, Lynk Global, MDA Space and SES. Currently, service is limited to emergency SOS, simple text messages and apps that use only small bits of data.

The tech will advance, but the market is likely smaller than forecasts predict because of technical limits (not working indoors) and challenging business models.

The artificial intelligence boom is stoking demand for power semiconductors, the specialized chips that convert high-voltage power to the amount an AI chip uses.

Global revenue will jump to $100 billion by 2029, up from about $80 billion in 2026, far faster than the traditional growth rate, as AI demands more power chips and requires high-performance materials such as silicon carbide and gallium nitride. Infineon Technologies is the clear industry leader. Other vendors include Onsemi, STMicroelectronics, Mitsubishi Electric, Texas Instruments and Analog Devices.

ALCOHOL

Concerns are brewing in Britain that the Iran war may cause a beer shortage.

The war is disrupting supplies of carbon dioxide, an essential component in the beer-making process. Britain’s CO2 supply was strained even before the war. A controversial trade deal with the U.S. last year has been cited for the curtailing of domestic bioethanol plants, a key source of CO2, leaving the country vulnerable.

The government is drawing up contingency plans in case the war lingers. And it’s not just beer. CO2 is used by the food industry, hospitals and more.

Yours very truly, 

April 23, 2026

THE KIPLINGER WASHINGTON EDITORS

P.S. Last year’s One Big Beautiful Bill has lots of tax changes. To keep track of them, visit kiplinger.com/go/taxletter for a free issue of The Kiplinger Tax Letter.

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