Defense stocks in Europe and Asia surged on Monday as investors assessed how the dramatic overthrow of Venezuelan leader Nicolas Maduro could herald a significant geopolitical shift that will boost the rearmament trade in the long run.
Rheinmetall, Germany’s largest arms manufacturer, gained over 7% in early trade, while military technology and surveillance specialist Hensoldt advanced almost 7%. Italy’s Leonardo rose 5.8%, while German counterpart Renk added 5.8%.
Swedish fighter jet maker Saab was up almost 5%.
Earlier, Japan’s IHI Corp led Asian defense stocks’ gains, advancing almost 10%, followed closely by Mitsubishi Heavy Industries, which rose 9.2%. Kawasaki Heavy Industries, meanwhile, was up 6.9%. In South Korea, Hanwa Aerospace was up more than 6%, while shares in Poongsan were 2% higher.
Fawaz Chaudhry, chief investment officer at Fulcrum Asset Management, said Maduro’s overthrow is a “signaling exercise” that will reshape geopolitics.
“As President Trump invoked the Monroe Doctrine, he’s talking about the near sphere in America taking control through hard power, through hard power assets,” Chaudhry told CNBC’s “Europe Early Edition” on Monday.
“We’re talking about a world trying to shift to a new era, where we will basically [have] hard power military assets, and go and take control, which basically is a different policy from before.”
Chaudhry expects that this more assertive U.S. foreign policy approach will mean “more rearmament of Europe, rearmament of Asia,” in the longer term, adding that defense stocks and military spending will continue to rise.
“What President Trump and what America just did in Venezuela will actually reinforce that. More military spending, more rearmament, of Europe, of Asia, so that trend will continue,” he explained.
The gains made by European defense names mark a sharp reversal for the sector, which has struggled in recent weeks amid the prospect of a potential peace agreement between Ukraine and Russia.
