While the European defence sector has already been undergoing transformation for several years, recent months have reinforced the idea that it could be entering a sustained upward cycle. Government budgets are increasing significantly; uncertainty surrounding the US commitment within NATO is pushing states to seek military autonomy; finally, technological innovation is transforming the very nature of "defence".
“ Europe must invest more in its security, and do it together, for a stronger European defence. ”
In this context, many investors are wondering: is it still time to buy these stocks that have already risen sharply, or are the best opportunities behind us?
The latest analyses from several specialised firms highlight the existence of strategic stocks that could still hold potential, while also reminding of the uncertainty linked to future order books.
An expanding, but still uncertain market
Defence spending rising sharply
There is now talk of budgets potentially reaching 3% or 3.5% of GDP in some European countries by 2030 or 2032. These figures, if they materialise, represent a huge leap compared to levels just five years ago. But beyond the announcements, the exact allocation of these funds remains to be confirmed: which programmes will be prioritised? Which companies will be selected? The adoption of military contracts often follows a complex political and administrative process.
New orders (finally) signed
Several big names – both civil and military – have already announced record order books, such as companies like Rolls-Royce (engines for strategic bombers, international pacts) or Germany's Rheinmetall (armoured vehicles, munitions). However, experts point out that each contract does not immediately translate into revenue and that a time lag can exist between the announcement and the actual impact on financial performance.
Market uncertainty
This strong momentum therefore remains accompanied by a degree of uncertainty: if the euphoria were to cool down (political change, economic slowdown, etc.), some stocks could suffer sharp corrections. The potential arrival of new competitors and budgetary choices (preference for "made in Europe" supplies or, conversely, international tenders) are other factors to monitor closely.
Our selection of verified and recommended brokers:
Here are the brokers that our experts have rigorously hand-picked and verified to help guide you towards your financial goals with confidence and peace of mind.
Quality customer service 🏆
Advantages
Minimum deposit: £0
Spreads: 0.5 pip on S&P 500, 1 pip on FTSE 100, 1 pip on CAC 40
Open and close your positions 24/5
Trading simulator with £10,000 virtual funds
Integration with TradingView and ProRealTime
Over 50 years of expertise
Recommended broker 🏆
Advantages
Min deposit: £10
Spreads: 0.1 pip on eur/usd and eur/gbp, 0.3 pip for the sp500 and 0.8 pip for the FTSE 100
Buy shares and ETFs with no commission
Online courses for investors of all levels
Demo account with £20,000 virtual funds
Ultra-low spreads 🏆
Advantages
Minimum deposit: £0
Spreads: 0.5 pip on EUR/USD, 0.45 pip on FTSE 100 and 0.8 pip on EUR/GBP and EUR/CHF
Over 20 years of experience
Fund protection up to 1 million GBP
Ultra-competitive spreads
Advanced chart analysis with TradingView
Quality customer service 🏆
Advantages
Minimum deposit: £0
Spreads: 0.5 pip on S&P 500, 1 pip on FTSE 100, 1 pip on CAC 40
Open and close your positions 24/5
Trading simulator with £10,000 virtual funds
Integration with TradingView and ProRealTime
Over 50 years of expertise
Recommended broker 🏆
Advantages
Min deposit: £10
Spreads: 0.1 pip on eur/usd and eur/gbp, 0.3 pip for the sp500 and 0.8 pip for the FTSE 100
Buy shares and ETFs with no commission
Online courses for investors of all levels
Demo account with £20,000 virtual funds
Ultra-low spreads 🏆
Advantages
Minimum deposit: £0
Spreads: 0.5 pip on EUR/USD, 0.45 pip on FTSE 100 and 0.8 pip on EUR/GBP and EUR/CHF
Over 20 years of experience
Fund protection up to 1 million GBP
Ultra-competitive spreads
Advanced chart analysis with TradingView
A dynamic that some European leaders are calling to strengthen, such as Emmanuel Macron:
“ Europe has the economic strength, the power and the talent to rise to the challenge of this era and to compare itself with the United States of America, not to mention Russia. We have the means. We must therefore act united as Europeans and determined to protect ourselves. ”
Top 10 best European defence stocks and ETFs
#1 - Rheinmetall (Germany)
- ✅ Why believe in it? Specialising in armoured vehicles and artillery, Rheinmetall benefits from increased orders for land equipment. Its ability to respond quickly to European demand has earned it a positive reassessment from several market observers.
- ⚠️ Caution: Much of the rise is already "priced in". Potential delivery delays or a slowdown in German budgets could cause a sharp correction.
#2 - Rolls-Royce (United Kingdom)
- ✅ Why believe in it? Famous for its aircraft engines, the firm also benefits from major defence contracts (international submarine pact, engines for certain military aircraft). Some analysts believe its post-crisis results confirm the company's recovery.
- ⚠️ Caution: The share price has already rebounded significantly. It remains to be seen if the momentum in military orders will be sustained over the long term.
#3 - Thales (France)
- ✅ Why believe in it? Defence electronics, cybersecurity, radar, and avionics: Thales covers a broad spectrum of military needs. Analysts mention still solid potential, thanks to contract prospects for critical systems (radar, guided missiles, etc.).
- ⚠️ Caution: Thales is heavily dependent on French and European budgetary decisions. Any postponement of major projects could weigh on its share price.
#4 - BAE Systems (United Kingdom)
- ✅ Why believe in it? A leader in aerospace, naval, and cybersecurity, BAE benefits from international orders (Australia, Middle East, etc.) and diversification across segments.
- ⚠️ Caution: The stock has already had a strong run. Some experts consider its valuation close to fair value, limiting the potential for short-term gains.
#5 - Leonardo (Italy)
- ✅ Why believe in it? Active in helicopters, avionics, and various electronic systems, Leonardo is at the heart of several European programmes. Its expertise provides resilience against political cycles.
- ⚠️ Caution: After a strong rally, the stock seems to have reached a level considered fair by many analysts. New contracts will largely determine the next move.
#6 - Saab (Sweden)
- ✅ Why believe in it? Manufacturer of the Gripen, but also submarines and naval systems. The increase in defence spending in Nordic countries may favour Saab, which remains a key regional player.
- ⚠️ Caution: The stock has already climbed significantly. Keep an eye on competition in the aerospace and naval fields, particularly in the combat aircraft segment.
#7 - Safran (France)
- ✅ Why believe in it? Part-civil (aircraft engines via CFM), part-military (avionics and drones), Safran benefits from the post-Covid recovery in civil aviation as well as European defence budgets.
- ⚠️ Caution: Aerospace and military cycles are not always synchronised. A decline in air traffic could curb its profits, even if the defence side provides a partial offset.
#8 - Kongsberg Gruppen (Norway)
- ✅ Why believe in it? Specialising in maritime systems, missiles, and underwater robotics. As many European navies modernise their fleets, Kongsberg could benefit.
- ⚠️ Caution: Less publicised, the stock may be subject to higher volatility, sometimes with lower trading volume.
#9 - ETFs focused on European defence (e.g., HANetf Future of Defence UCITS ETF - NATO, VanEck Defense UCITS ETF - DFNX…)
- ✅ Why believe in it? Offer diversified exposure to the sector without having to select specific stocks. Ideal for reducing specific company risk. (Note: Replaced example tickers with relevant UCITS ETFs available to UK/European investors).
- ⚠️ Caution: Some ETFs are recent, potentially with higher management fees. Always check the exact composition, as some may also include non-European firms.
#10 - Bonus picks: Dassault Aviation and MBDA (via Airbus, BAE or Leonardo)
- ✅ Why believe in it? Dassault benefits from Rafale exports and potential collaborations for new combat aircraft (FCAS - Future Combat Air System). MBDA, a missile specialist, is owned by several European giants and could thus benefit the shareholders of the parent companies (Airbus, BAE, Leonardo).
- ⚠️ Caution: Dassault Aviation remains dependent on highly variable state-to-state contracts; MBDA is not directly listed, so you must invest via the groups that own it to benefit.
Conclusion: Channelling the enthusiasm
Recent market movements demonstrate how much European defence has become a major theme for investors. Fears about the reliability of the American commitment to NATO, combined with geopolitical tensions, compel the EU to strengthen its military capabilities. This situation obviously benefits companies in the sector: Rheinmetall, Rolls-Royce, and Thales show that, despite the sharp rises already achieved, there is still room for growth if budgetary promises materialise to the tune of several hundred billion euros.
However, a degree of realism is necessary:
- Uncertainty remains high: Contracts still need to be signed, budgets approved, and the exact share for each player is yet to be determined.
- Beware of "overreactions": Conflicts, political announcements, and diplomatic breakdowns can inflate valuations, sometimes beyond reasonable levels.
- Diversification remains an asset: Combining a basket of promising (but potentially volatile) stocks with sector ETFs helps limit specific company risk.
Ultimately, the current enthusiasm surrounding European defence is based on solid foundations: rearmament, technological sovereignty, growth in military orders. The outlook extends over several years, perhaps even a decade, so the train may not have left the station yet. But getting on board now requires composure and selectivity, to avoid overpaying for enthusiasm sometimes fuelled by the flow of geopolitical news. As always on the stock market, distinguishing between true potential and a simple windfall effect remains the key to successful investment.
