The US announced it was deploying nearly 3,000 extra troops to the Middle East on Friday as Iran vowed “severe revenge” on those responsible for Soleimani’s killing.
Iran’s expected retaliation means America’s long-running military presence in Iraq and the Middle East, which has financially benefited US defence companies, is unlikely to wind down.
The killing of Soleimani, a powerful military commander, has sparked fears of an all-out war between the US and Iran, which would lead to increased military spending.
Donald Trump has said the airstrike was a defensive move and claimed Soleimani was “plotting imminent and sinister attacks on American diplomats and military personnel”.
“We took action last night to stop a war. We did not take action to start a war,” Mr Trump said on Friday.
However, the assassination is a clear escalation in US-Iran tensions and is likely to increase clashes between the two countries.
Tasnim news agency has quoted a senior commander in Iran’s Revolutionary Guards as saying the country “will punish Americans wherever they are within reach” in retaliation for Soleimani’s killing.
On Saturday, thousands of mourners in Baghdad, Iraq, marched in a funeral procession for the commander and chanted “America is the Great Satan” and “Death to America”.
The US State Department has already urged all US citizens to leave Iraq following a New Year’s Eve attack on an embassy in Baghdad by an “Iranian-backed” group.
Stock market analysts tracking the defence market believe the escalated tensions in the region could lead to increases in military spending, according to The Washington Post.
Oil prices also surged following the strike on Friday, with US crude oil climbing by 3.1 per cent, while stocks fell broadly on Wall Street.
Roman Schweitzer, from the Cowen Washington Research Group, has said the airstrike is a “major escalation” that shifts US-Iran tensions towards a direct confrontation.
“This is the equivalent of Iran killing the US chairman of the joint chiefs of staff or the director of the Central Intelligence Agency and then taking credit for it” Mr Schweitzer wrote in an analyst note.
Sheila Kahyaoglu, an analyst for Jefferies Investment Bank, also wrote to investors that the threat of conflict in the Middle East “points to the broad threat profile that supports elevated levels of spending”, according to The Post.
Additional reporting by AP