Shares of major European defence contractors climbed in early trading on Thursday, with gains ranging from 1.8% to 7.1% at 06:44 ET (10:44 GMT) as the U.S.-Israeli campaign against Iran entered its tenth day. Names that rose included Leonardo, Renk Group, Hensoldt, Saab, Rheinmetall, Thales, Dassault, BAE Systems, Kongsberg Gruppen, Babcock International and Fincantieri.
The stock moves occurred even as Bernstein analysts cautioned that European defence firms should see only limited direct benefit from the confrontation. In a note, the brokerage said: "We believe there should be very little impact on EU defense companies from the Iran war." Bernstein data cited underperformance of European defence equities relative to U.S. peers since Feb. 24.
On the battlefield, Israel’s military reported a substantial degradation of Iran’s missile capability, saying Iran’s missile inventory has fallen to fewer than 1,000 from an estimated 2,500 at the start of hostilities, and that 60%-75% of its missile launchers have been destroyed. U.S. officials also reported significant operational strikes: U.S. forces have struck more than 5,000 targets, and U.S. Defense Secretary Hegseth said Iranian ballistic missile attacks are down 90% and drone attacks down 83%.
In Washington, the White House convened senior executives from leading U.S. defence companies last Friday to discuss stepping up production. Bernstein expects that meeting to help convert production framework agreements at RTX and LMT into formal contracts. The brokerage also said a supplemental spending bill of $50 billion or more is likely to follow.
Bernstein outlined specific production adjustments under discussion or planned by U.S. contractors. It said Lockheed Martin has a framework to raise PAC-3 interceptor output to 2,000 units annually from around 600, and to lift THAAD production from 96 to 400 per year. RTX is targeting Tomahawk output of over 1,000 units annually and SM-6 production above 500 per year, up from about 125.
Operational use of precision munitions has been substantial, Bernstein noted, with more than 2,000 JDAMs and Small Diameter Bombs (SDBs) deployed since the conflict began. The firm also reported that Israel has separately announced a purchase of 5,000 additional SDBs from Boeing for delivery over three years.
Bernstein set out two possible market scenarios for defence equities. In the brokerage’s more likely scenario, Iran’s degraded offensive capability eases the regional threat and defence shares would "give back most of their gains," a response Bernstein says echoes market behaviour after prior regional shocks such as Russia’s invasion of Georgia and Hamas’s attack on Israel. Under a broader escalation - which Bernstein framed to include possibilities such as Russian intervention or deployment of U.S. ground forces in Iran - defence budgets could experience sustained growth on the scale of post-9/11 increases or those seen after Russia’s invasion of Ukraine. Even in that more extreme outcome, Bernstein said it would "not expect Trump’s budget goal of $1.5 trillion to be met."
On specific company valuations cited by Bernstein, Rheinmetall was rated "outperform" with a price target of 050, while trading at 653 as of March 10. BAE Systems was rated "market-perform" with a 2,200p target and was trading at 2,249p, according to Bernstein data.
Market context and implications
The early rally among European defence stocks reflects investor sensitivity to conflict-related developments, but analysts emphasize that near-term market moves may not translate into durable revenue or order-book gains for EU-based contractors. At the same time, reported U.S. moves to expand production and the potential for sizeable supplemental spending could advantage U.S. manufacturers if enacted.