European Defense Stocks Dip as Middle East Tensions Ease
Milan, Italy – European defense stocks are experiencing a downturn as receding geopolitical tensions in the Middle East diminish the “risk premium” that fueled significant gains in recent months. Shares in major defense companies are falling across European markets, reversing a trend driven by escalating conflicts in both Israel and Ukraine.
Analysts at Saxo Bank attribute the decline to “tensions ease[ing],” following a surge in defense stock valuations after the October 7th attacks. The sector had benefited from increased investor appetite linked to the global arms race. In milan, Leonardo – Finmeccanica is leading the losses on the FTSE MIB, with investors taking profits after the stock more than doubled in value sence the start of the year, rising from €26 to its current price. Similar drops are being seen for Rheinmetall and Hensoldt in Frankfurt, as well as Thales in Paris and Bae Systems in London.
Despite the current pullback, the long-term outlook for european defense remains robust. The European Union is actively pursuing initiatives to bolster its defense capabilities and reduce reliance on U.S. imports, which currently account for 64% of the market.Through the European Safe regulation and the Readiness 2030 plan, Europe aims to mobilize up to €800 billion in defense investments by 2030, prioritizing collaborative procurement and addressing critical capability gaps to foster a stronger European defense industry.
