The movie begins with Tony Stark (Robert Downey Jr.) riding with soldiers on duty in Afghanistan. He is joking with some members of a convoy who seem to be genuinely amused by his persona and his flamboyant public image. Suddenly, the convoy is attacked. The soldiers fight to defend themselves but are quickly killed. Stark flees the Humvee, taking refuge behind a large rock. A missile lands nearby, remaining intact long enough for Tony to see the Stark Industries logo on it. It explodes sending shrapnel into Tony's chest despite the body armor he wears. Tony is captured and recorded on video by a group of masked terrorists.
A flashback sequence reveals Tony's history as a child prodigy before taking over his father's company, Stark Industries, at age 21. Colonel James "Rhodey" Rhodes (Terrence Howard) attends a ceremony to present Tony Stark with an award for his work, but Tony is not in attendance. Tony's right-hand man (and his father's former partner) Obadiah Stane (Jeff Bridges) accepts the award in Tony's stead. Rhody later finds Tony partying in a casino. On his way out, a reporter named Christine (Leslie Bibb) approaches Stark with some questions regarding the ethics of his weapons business. Stark deflects her questions with some swift quips and the two end up spending the night together at Tony's oceanfront house.