European Defense Stocks Rise Collectively After Iran Attacks Commercial Vessel

Investing.com - On Thursday at 06:44 AM Eastern Time (18:44 Beijing Time), shares of Leonardo, Renk Group, Hensoldt, Saab, Rheinmetall, Thales, Dassault, BAE Systems, Kongsberg Gruppen, Babcock International, and Fincantieri rose between 1.8% and 7.1%, as the U.S.-Israel military operations against Iran entered its tenth day.

Despite Bernstein analysts warning that European defense companies are gaining little from this conflict, their stock prices still increased. The firm stated in a report: “We believe the impact of the Iran war on EU defense companies should be very small.” According to Bernstein data, since February 24, European defense stocks have generally underperformed their U.S. counterparts.

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The Israeli military announced that Iran’s missile stockpile has decreased from an estimated 2,500 at the start of the conflict to less than 1,000, with 60%-75% of missile launchers destroyed. U.S. Defense Secretary Hegseth said that the U.S. military has struck over 5,000 targets, reducing Iranian ballistic missile attacks by 90% and drone attacks by 83%.

Last Friday, the White House convened senior executives from major U.S. defense companies to discuss increased production.

Bernstein expects this meeting “will solidify the shift of RTX and Lockheed Martin’s production frameworks toward actual contracts,” potentially followed by a supplemental spending bill of $50 billion or more.

Lockheed Martin has outlined plans to increase annual PAC-3 interceptor production from about 600 to 2,000 units, and THAAD annual production from 96 to 400 units.

According to Bernstein, RTX aims to boost annual Tomahawk missile production to over 1,000, and SM-6 production from 125 to over 500 annually.

Since the conflict began, over 2,000 JDAMs and small diameter bombs have been deployed. Bernstein also states that Israel has announced an additional 5,000 SDBs purchased from Boeing, to be delivered within three years.

Bernstein outlined two scenarios for defense stocks. In the more likely outcome, Iran’s reduced offensive capability lowers regional threats, leading to a “retracement of most gains,” similar to market reactions after Russia’s invasion of Georgia and Hamas’ attack on Israel.

In a broader escalation involving Russian intervention or U.S. ground forces entering Iran, budgets could continue to grow at levels comparable to post-9/11 or after Russia’s invasion of Ukraine. Bernstein notes that even in such cases, “the $1.5 trillion budget target set by Trump is not expected to be achieved.”

Rheinmetall is rated by Bernstein as “outperform,” with a target price of €2,050. As of March 10, the trading price was €1,653. According to Bernstein data, BAE Systems is rated as “market perform,” with a target price of 2,200 pence, and a trading price of 2,249 pence.

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