Yesterday, European defence stocks surged off the back of escalating transatlantic tensions relating to the Russo-Ukrainian war.
This comes after calls from Washington for European nations to increase their military expenditure, while concerns are also rising with regards to a potential breakdown in military ties between the US and Europe.
European defence stocks are soaring – BAE Systems is up 9%, and Rheinmetall has jumped 14%. This isn’t just random market movement.
Investors are betting big on increased defence spending as tensions rise across the Atlantic and NATO leaders discuss their next moves. This also appears to be more than a short-lived trend. In fact, European leaders are hinting at long-term defence budget increases, possibly pushing past 3% of GDP.
Since US markets were closed yesterday for Presidents’ Day, no trading activity occurred.
American defence stocks like Lockheed Martin and Raytheon will likely follow Europe’s lead once trading resumes today. With geopolitical tensions ramping up, global demand for military equipment is rising – and investors know it.
Industries beyond defence are also likely to feel the ripple effects. In aerospace, companies like Rolls-Royce could see a boost from heightened demand for military aircraft. The energy sector may experience price increases due to rising tensions, which could also drive more investments in alternative energy sources. Meanwhile, reconstruction and infrastructure industries may benefit significantly if peace agreements are reached, particularly with opportunities related to rebuilding efforts in Ukraine.
