When Argentina invaded the Falkland Islands in April 1982, Powell was given secret briefings on Privy Councillor terms on behalf of his party. On 3 April, Powell said in the Commons that the time for inquests on the government's failure to protect the Falkland Islands would come later and that although it was right to put the issue before the United Nations, Britain should not wait upon that organisation to deliberate but use forceful action now. He then turned to face Thatcher: "The Prime Minister, shortly after she came into office, received a sobriquet as the "Iron Lady". It arose in the context of remarks which she made about defence against the Soviet Union and its allies; but there was no reason to suppose that the right hon. Lady did not welcome and, indeed, take pride in that description. In the next week or two this House, the nation and the right hon. Lady herself will learn of what metal she is made". According to Thatcher's friends this had a "devastating impact" on her and encouraged her resolve.
On 14 April, in the Commons, Powell claimed "it is difficult to fault the military and especially the naval measures which the Government have taken". He added: "We are in some danger of resting our position too exclusively upon the existence, the nature and the wishes of the inhabitants of the Falkland Islands... if the population of the Falkland Islands did not desire to be British, the principle that the Queen wishes no unwilling subjects would long ago have prevailed; but we should create great difficulties for ourselves in other contexts, as well as in this context, if we rested our action purely and exclusively on the notion of restoring tolerable, acceptable conditions and self-determination to our fellow Britons on the Falkland Islands.... I do not think that we need be too nice about saying that we defend our territory as well as our people. There is nothing irrational, nothing to be ashamed of, in doing that. Indeed, it is impossible in the last resort to distinguish between the defence of territory and the defence of people".
Powell also criticised the United Nations Security Council's resolution calling for a "peaceful solution". He said whilst he wanted a peaceful solution, the resolution's meaning "seems to be of a negotiated settlement or compromise between two incompatible positions-—between the position which exists in international law, that the Falkland Islands and their dependencies are British sovereign territory and some other position altogether... It cannot be meant that one country has only to seize the territory of another country for the nations of the world to say that some middle position must be found.... If that were the meaning of the resolution of the Security Council, the charter of the United Nations would not be a charter of peace; it would be a pirates' charter. It would mean that any claim anywhere in the world had only to be pursued by force, and points would immediately be gained and a bargaining position established by the aggressor".
On 28 April, Powell spoke in the Commons against the Northern Ireland Secretary's (Jim Prior) plans for devolution to a power-sharing assembly in Northern Ireland: "We assured the people of the Falkland Islands that there should be no change in their status without their agreement. Yet at the very same time that those assurances were being repeated, the actions of the Government and their representatives elsewhere were belying or contradicting those assurances and showing that part at any rate of the Government was looking to a very different outcome that could not be approved by the people of the islands. Essentially, exactly the same has happened over the years to Northern Ireland". He further claimed that power-sharing was a negation of democracy.
The next day Powell, disagreed with the Labour Party leader Michael Foot's claim that the British government was acting under the authority of the United Nations: "The right of self-defence—-to repel aggression and to expel an invader from one's territory and one's people whom he has occupied and taken captive-—is, as the Government have said, an inherent right. It is one which existed before the United Nations was dreamt of".
On 13 May Powell, said the task force was sent "to repossess the Falkland Islands, to restore British administration of the islands and to ensure that the decisive factor in the future of the islands should be the wishes of the inhabitants" but the Foreign Secretary (Francis Pym) desired an "interim agreement": "So far as I understand that interim agreement, it is in breach, if not in contradiction, of each of the three objects with which the task force was dispatched to the South Atlantic. There was to be a complete and supervised withdrawal of Argentine forces... matched by corresponding withdrawal of British forces. There is no withdrawal of British force that 'corresponds' to the withdrawal from the territory of the islands of those who have unlawfully occupied them. We have a right to be there; those are our waters, the territory is ours and we have the right to sail the oceans with our fleets whenever we think fit. So the whole notion of a 'corresponding withdrawal', a withdrawal of the only force which can possibly restore the position, which can possibly ensure any of the objectives which have been talked about on either side of the House, is in contradiction of the determination to repossess the Falklands".
After British forces successfully recaptured the Falklands, Powell asked Thatcher in the Commons on 17 June, recalling his statement to her of 3 April: "Is the right hon. Lady aware that the report has now been received from the public analyst on a certain substance recently subjected to analysis and that I have obtained a copy of the report? It shows that the substance under test consisted of ferrous matter of the highest quality, that it is of exceptional tensile strength, is highly resistant to wear and tear and to stress, and may be used with advantage for all national purposes?" She replied, "I think that I am very grateful indeed to the right hon. Gentleman. I agree with every word that he said". Their mutual friend Ian Gow printed and framed this and the original question and presented it to Thatcher, who hung it in her office.
Powell wrote an article for The Times on 29 June, in which he said: "The Falklands have brought to he surface of the British mind our latent perception of ourselves as a sea animal.... No assault on a landward possession would have evoked the same automatic defiance, tinged with a touch of that self sufficiency which belongs to all nations". The United States' response was "very different but just as deep an instinctual reaction... the United States have an almost neurotic sense of vulnerability... its two coastlines, its two theatres, its two navies are separated by the entire length of the New World... she lives with... the nightmare of having one day to fight a decisive sea battle without the benefit of concentration, the perpetual spectre of naval 'war on two fronts'." Powell added: "The Panama Canal from 1914 onwards could never quite exorcise the spectre.... It was the position of the Falkland Islands in relation to that route which gave and gives them their significance—-for the United States above all. The British people have become uneasily aware that their American allies would prefer the Falkland Islands to pass out of Britain's possession into hands which, if not wholly American, might be amenable to American control. In fact, the American struggle to wrest the islands from Britain has only commenced in earnest now that the fighting is over". Powell then said there was "the Hispanic factor": "If we could gather together all the anxieties for the future which in Britain cluster around race relations... and then attribute them, translated into Hispanic terms, to the Americans, we would have something of the phobias which haunt the United States and addressed itself to the aftermath of the Falklands campaign".
Writing in The Guardian on 18 October, Powell asserted that due to the Falklands War, "Britain no longer looked upon itself and the world through American spectacles" and the view was "more rational; and it was more congenial; for, after all, it was our own view". He quoted an observation that Americans thought their country was "a unique society... where God has put together all nationalities, races and interests of the globe for one purpose-–to show the rest of the world how to live". He denounced the "manic exaltation of the American illusion" and compared it to the "American nightmare". Powell also disliked the American belief that "they are authorised, possibly by the deity, to intervene, openly or covertly, in the internal affairs of other countries anywhere in the world". Britain should dissociate herself from American intervention in the Lebanon: "It is not in Britain's self-interest alone that Britain should once again assert her own position. A world in which the American myth and the American nightmare go unchallenged by question or by contradiction is not a world as safe or as peaceable as human reason, prudence and realism can make it".
Speaking to the Aldershot and North Hants Conservative Association on 4 February 1983, Powell blamed the United Nations for the Falklands War by the General Assembly resolution of December 1967 that stated "its gratitude for the continuous efforts made by the Government of Argentina to facilitate the process of decolonisation" and further called on Britain and Argentina to negotiate. Powell said that "it would be difficult to imagine a more cynically wicked or criminally absurd or insultingly provocative action". As 102 had voted for this resolution, with only Britain voting against it (with 32 abstentions), he claimed it was not surprising that Argentina had continually threatened Britain until this threatening turned into aggression: "It is with the United Nations that the guilt lies for the breach of the peace and the bloodshed". The UN knew that no international forum had ruled against British possession of the Falklands but had voted its gratitude to Argentina who wanted to annexe the Islands from their rightful owners. It was therefore "disgraceful" for Britain to belong to such a body that engaged in "pure spite for spite's sake against the United Kingdom": "We were, and are, the victims of our own insincerity. For over thirty years we have sanctimoniously and dishonestly pretended respect, if not awe, for an organisation which all the time we knew was a monstrous and farcical humbug.... The moral is to cease to engage in humbug, which almost all have happily and self-righteously engaged in for a generation".
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