MILAN — Amid a widening trans-Atlantic rift and prospects of a major re-armament across Europe, the stock value of several European defense companies surged to record highs on Monday.
European leaders held an emergency meeting in London on March 2 to discuss the urgency of boosting military spending and for the continent to rapidly build up its own defense over concerns that U.S. support could end.
The expectation of incoming higher arms spending was one of the factors that led to the European aerospace and defense sector stock index to rise a record high of 7.7% on March 3, as reported by Reuters.
The stocks of German, French, British, and Italian defense manufacturers were the ones that experienced the largest jumps. Italy’s Leonardo surged 16%, followed closely by Britain’s BAE Systems and Thales which gained more than 14% while German defense group Rheinmetall advanced 13,7%, according to the Wall Street Journal.
Stock prices generally reflect the overall opinion of market participants, such as investors, regarding a company’s current state, size and sales prospects. Increased share prices may indicate a positive sentiment while a drop can suggest the opposite.
EU member states have been scrambling over the last week to come up with a peace plan that could secure Ukraine’s future and put an end to Russia’s unlawful invasion of the war-torn country.
In the aftermath of an explosive meeting between the U.S. President Donald Trump and Ukraine’s leader, Volodymyr Zelensky, on Feb. 28, there has been renewed pressure for European nations to move away from U.S. dependency for defense equipment.
Previously, many have turned to Israeli and South Korean defense manufacturers as their preferred alternative, although this changed following Israel’s offensive in Gaza, which has left some governments apprehensive.
Shifting away from U.S. weapons in the short-term is easier said than done and will require Europe to double down on supporting its national industries as well as diversifying its military partners.
That process seems to have already begun, as Israeli and South Korean defense stocks also rose this week. Israeli defense contractor Elbit Systems recorded a surge of 8.1% on March 3, and the shares of South Korean manufacturers Hanwha Aerospace increased 16,7%, according to CNBC.
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