Austro-Italian ironclad arms race
Seizing upon the decline of the Regia Marina in the years immediately after the Battle of Lissa, Tegetthoff worked to continue the efforts of Archduke Ferdinand Max of expanding the ironclad fleet of the now Austro-Hungarian Navy. Tegetthoff found political allies in the Austro-Hungarian Minister of War Carl von Franck and retired Admiral Bernhard von Wüllerstorf-Urbair. Wüllerstorf's and Franck's primary arguments in favor of continuing with the ironclad program Austria had engaged in prior to the Seven Weeks War lay largely along economic grounds. The two believed that constructing new ironclad warships would rejuvenate Austria-Hungary's economy following the defeat at the hands of Prussia and Italy, and that such a fleet would help to open up new commercial opportunities in the Levant and the Middle East. These proposals would be shelved however while Austria continued to reel from the military defeats inflicted by Prussia, and several cabinet reshufflings by Emperor Franz Joseph I resulted in a government more interested in pursuing revenge against Prussia than constructing new ironclads, which would be of little use in a hypothetical second war with Prussia.
Archduke Albrecht, Duke of Teschen
At the outbreak of the Seven Weeks' War in June 1866, Albrecht was named commander of the southern army facing the Italian forces of King Victor Emmanuel II. Albrecht was decisively victorious in the battle of Custoza (24 June 1866), but failed to exploit his victory when he neglected to pursue the beaten Italian "Army of the Mincio". Any advantages for the Austrians however were canceled out by the crushing defeat on 3 July at Königgrätz, where Ludwig von Benedek was surprised by the speed of Helmuth von Moltke's concentric advance into Bohemia.