Iran Conflict Puts USA Rare Earth Back in Play

The Iran Catalyst

Joint U.S.-Israeli strikes on Iranian nuclear and military infrastructure in late February triggered a reassessment of rare earth supply risk that continues to ripple through markets. China processes roughly 90% of the world's rare earths and has already imposed export restrictions on refined rare earth metals and alloys once before, in April 2025. If Beijing views the Iran strikes as crossing a line, a second round of restrictions would hit the U.S. defense industrial base within months — and the Pentagon is legally prohibited from sourcing Chinese rare earths for military hardware starting in 2027.

USAR logged a 10.4% gain on March 2 as the weekend escalation repriced domestic rare earth exposure. The stock has continued to grind higher through the week, with the latest leg adding another ~10% as the conflict shows no signs of de-escalation.

Round Top Consolidation

On March 5, USAR announced an all-stock acquisition of Texas Mineral Resources for approximately $73 million, issuing 3.82 million USAR shares to absorb TMRC's 18.6% minority interest in the Round Top deposit. The deal gives USAR 100% economic interest and exclusive operating control over what the company calls North America's richest known heavy rare earth deposit — roughly 950 acres of active leases plus prospecting rights on an additional 9,345 acres in West Texas.

The consolidation matters because it removes a governance overhang and unifies capital planning under a single operator. USAR's mine-to-magnet strategy — extracting feedstock at Round Top and processing it at the Stillwater, Oklahoma facility — requires tight coordination that a joint-venture structure complicates. Under the updated asset management plan, USAR expects to extract approximately 40,000 metric tons per day of rare earth and critical mineral feedstock from Round Top by 2030.

The Macro Setup

The company-specific story sits on top of a rare earth macro that has shifted dramatically in 2026. NdPr oxide — the key input for permanent magnets used in EVs and wind turbines — has roughly doubled from $53/kg to $108/kg since January, driven by stronger-than-expected EV registration data out of China and Europe.

On the policy side, the Trump administration took a direct 10% equity stake in USAR as part of a $1.6 billion investment package announced in late January, and followed with Project Vault, a $10 billion critical minerals stockpile initiative in early February. USAR is up 83% year-to-date at a $3.8 billion market cap, with management projecting $2.6 billion in revenue and $900 million in free cash flow by 2030.

The risk is execution. The Stillwater facility needs to be operational by late 2026 to meet the timeline, and the Center for Strategic and International Studies identifies rare-earth metallization as the most difficult capability to rebuild outside China. February's 15.7% pullback — triggered partly by a Supreme Court ruling striking down some Trump tariffs and Vance's announcement of a 50-country mineral coalition — showed how quickly the trade can reverse when the policy narrative shifts.

What to Watch

The TMRC merger needs shareholder approval, SEC clearance, and Nasdaq listing of the merger shares, with closing targeted for Q3 2026. Any delay or regulatory friction would reintroduce the governance complexity the deal is meant to eliminate.

More immediately, the Iran situation remains the dominant variable. If China retaliates with rare earth export controls — even targeted ones — the entire domestic rare earth complex reprices higher. If the conflict stabilizes or Beijing signals restraint, the geopolitical premium unwinds. USAR's 10x leverage availability on Hyperliquid makes it a high-beta expression of that bet in either direction.

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