The sector rallied in Europe, the US, and parts of Asia, with investors betting tensions will keep military spending elevated and order books fuller for longer.
Defence shares pushed higher on Thursday after the US intervention in Venezuela added fresh geopolitical heat to an already jittery week for markets.
Europe’s aerospace and defence sector hit record levels, with investors reacting to rising tensions such as the spillover from recent developments in Venezuela to soundbites from Washington DC discussing a possible US takeover of Greenland.
Expectations that military spending will stay elevated pushed the sector up by more than 2%, according to the key European aerospace and defence equity benchmark.
London-listed BAE Systems was up 5.24% in the afternoon while Germany’s Rheinmetall gained 1.37% and Italy’s Leonardo rose 2.55%. Sweden’s Saab was up 2.39% and UK countermeasures specialist Chemring went up by 0.79%.
US defence firms also gained in pre-market trading, particularly after statements by US President Donald Trump calling for a $1.5 trillion (€1.3tn) US military budget in 2027.
Northrop Grumman was indicated up 8.52% in pre-market trading and Lockheed Martin traded with an up to 7.67% increase, while RTX was up 3.78%. Smaller contractor Kratos was shown up 13.01%.
Asia had already seen a similar tilt earlier in the day, with Japan’s Mitsubishi Heavy Industries up by 2.38%.
Stocks performed similarly in February 2022, when Russia’s full-scale invasion of Ukraine triggered a sharp increase in stock value for European defence names, influenced by the prediction that military budgets would go up.
The sector has continued to perform well as the invasion continues, with grim projections playing in their favour.
Another example came after the 7 October attacks on Israel by Hamas. In the days after the attack, aerospace and defence shares were almost 6% higher, while airlines fell.
