The U.S. raid in Venezuela and tensions surrounding Donald Trump’s plans for Greenland have renewed focus on global military spending, giving fresh momentum to Europe’s surging defense stocks.
A Bloomberg index of European defense companies has surged 10% since the start of the year, gaining momentum after the weekend capture of President Nicolás Maduro by the US military.
“Taking the example of the Venezuelan episode, it is a Latin American event, but it actually reinforces the idea that US security might become more transactional and more unilateral, even toward allies,” Saima Hussain, an analyst at Alphavalue, said on Bloomberg Television.
Defense stocks kicked off 2026 with gains, as Saab AB (SAABF) hit a record high Monday, while analysts continue to favor Germany’s Rheinmetall AG (RNMBF).
Bloomberg’s defense index surged 73% in 2025, as a government spending push powered a rally in the shares. The sector has quickly become key to the overall market, generating about 12% of returns for the Stoxx Europe 600 last year, the largest contribution after banks, the report said.
Morgan Stanley analysts, meanwhile, believe the sector provides good value as stocks are not reflecting the growth in the U.S. defense budget, with the firm upgrading L3Harris Technologies (LHX) and General Dynamics (GD) to Overweight ratings while maintaining Northrop Grumman (NOC) as its top pick.
In U.S. markets on Monday, defense giants L3Harris (LHX) and Heico (HEI) surged past key buy points, while AeroVironment (AVAV), Kratos (KTOS), and Israel’s Elbit Systems (ELST) also saw strong gains.
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