(Bloomberg) — On Wednesday, defense stocks enjoyed a significant increase throughout Europe and Asia, prompted by US President Donald Trump’s remarks suggesting that NATO countries should target Russian planes invading their airspace. His comments also conveyed a more favorable outlook on Ukraine’s prospects in the ongoing conflict.
Efforts by Goldman Sachs to gauge the rise of European defense firms illustrated a peak of 3.1%, while South Korean companies dominated regional growth across Asia.
Aneeka Gupta, from Wisdomtree UK Ltd., noted, “Trump’s statements seem to strengthen the argument for increasing European defense spending, and you can see that reflected in the market’s response.”
Increasing geopolitical strains globally, coupled with the anticipation of larger military budgets, have made the defense sector a popular investment. Notably, the MSCI World Aerospace & Defense Index recorded a staggering 51% upturn this year, far surpassing a nearly 17% increase in the overall global equity markets.
Prominent European defense manufacturer Rheinmetall AG saw a rise of 2.5% on Wednesday, while UK-based BAE Systems Plc climbed up by 2.2%. Meanwhile, Sweden’s Saab AB rose remarkably by 5.8%, hitting an all-time high.
In Asia, Hanwha Aerospace, the largest defense contractor in South Korea, jumped 5.4% to achieve a historical closing high. The company has been in discussions with various Western European nations to assist them in bolstering their arms production capabilities. Additionally, Korea Aerospace Industries and Hyundai Rotem both saw at least a 3% increase.
Moving to Japan, IHI Corp. surged by almost 10%, making it one of the best performers on the Topix index, while Mitsubishi Heavy Industries followed with a rise exceeding 5%. Likewise, DroneShield Ltd. from Australia saw an impressive rise of over 6%.
Meanwhile, in the US, Redwire Corp. experienced a 7.9% increase in premarket trading, following a notable 14% increase the previous day, after confirming that its Edge Autonomy division completed another drone delivery to Ukrainian forces.
According to Jung In Yun, CEO of Fibonacci Asset Management Global Pte., “Trump’s remarks have reignited awareness of geopolitical risks, driving defense stock prices up. With no sign of de-escalation of tensions, it’s expected that defense firms will have ample orders for the upcoming years.”
–This report received contributions from Youkyung Lee, Eleanor Thornber, and Subrat Patnaik.
(Updates include a strategist’s perspective in the third paragraph and details on Redwire shares in the eighth.)
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